Possible long swing opportunity on the Euro?

Posted by Bruce Levy on

In this article we review the Micro Euro Futures. The Micro Euro Futures (M6E) trades on the CME, overnight margin is reduced significantly depending on your broker, and oh the tick size is $1.25 making it great for swing trading on a small account.

In the image below we've charted a tick based line chart in order to see market development without getting too involved with the peculiarities of reading candlesticks.

 

The blue line is a regression slope indicating the direction of the current trends development.

 

The circular bubbles show a density plot which outline the consolidation levels very well.

 

The 3 horizontal lines split the trading range into quantiles.

This is simply another way to look at the distribution of price. What I find interesting is how the current price is now trading above the main trading range after first dipping below it, indicating support; but where is this support coming from?

The following weekly chart shows us that in the past few bars buyers have came in at this level to buy up the lows:

While the prior trend is down it appears price has been stabilizing in this area over the last 3-4 bars.

The micro contract gives us an opportunity to hold through the testing of these ranges in an attempt to capture a move to the upside of the trading range. 

The next chart shows that the Weekly is indeed trading between the 50-61.8 fib level.

In the above weekly chart we can see the 50%retrace of the yearly move has found some supportive price action. If you look near 1.25 you can the red diamond plot that indicates the start of the downmove that closed below the prior trading range. This area may act as a magnet for price to trade into. 

The risk to reward on this is good favorable because the stop location is well defined below the weekly lows. Targets of the 1.25 offer a huge upside potential in the event of a new change in trend taking place. 

The money is made in capturing these large trends.

Bruce.

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