Forex Monthly Candle Sticks – Worth A Look

Have you ever taken the time to “zoom out” on your charts, and have a look at things from a “monthly perspective”?

Same formations. Same patterns etc, only in that “each candle” represents an entire months trading information, as opposed to the 1 hour, 4 Hour ,daily or even weekly charts you may regularly peruse.

Monthly charts provide a “macro view” to say the least and are “extremely important” to take into consideration.

You’ve now come to understand “a reversal” formation, as well the “pin bar”, and can now likely pick out  a “swing high” or “swing low” in price action – at a moments glance. You’ve also come to recognize the “value” in identifying these “patterns of reversal” – as they provide for some pretty outstanding trade entries.

Now consider the implications when identifying such reversals on a “monthly time frame”.

Price action has moved higher in a “succession of higher highs and higher lows” for literally months, but now suggests reversal in a “monthly variance in price”. Imagine.

That’s huge, and the implications are vast.

When an asset has “swung high” or “reversed” on a monthly time frame, you can throw your hourly charts out the widow as…..the implications of the move to follow will be reflected in “months” of reversed price action, not merely in a couple of hours or even days.

Do you have the account balance to “hold” through a move like that? Do you “doubt” the reversal pattern? The same pattern you’ve come to rely on daily, hourly? (patterns, and areas of support and resistance become much “more reliable” the larger the time frame – not less.)

The SP 500 is “a hair” shy of “monthly reversal”.

That’s huge.

40 Responses

  1. Franky February 3, 2014 / 6:40 am

    Yeah, SP500 bull getting tired, just little more time to wait ….and then start shorting, right?

    • Forex Kong February 3, 2014 / 6:55 am

      Those damn ETF’s!

      Even when you get the timing “close to right” you just don’t ever seem to catch “enough” of the move.

      I dunno – pure play forex is pretty simple in times of correction, as JPY shoots for the moon. I had mentioned a couple months ago “getting short Japan” was a reasonable way to play it.

    • Forex Kong February 3, 2014 / 6:57 am

      Ya just pulled the chart on EWJ….looking like “next bounce” or move upward sets up for a nice play on “risk off” in general so….

      At only 11 – 12 bucks a guy could get in there with a decent position and maybe see it dump a buck er two.

  2. Power Corrupts February 3, 2014 / 6:59 am

    Kong! HUI and XAU established monthly swing lows in January. Better days ahead for the precious metals miners? (rhetorical question)

    • Forex Kong February 3, 2014 / 7:07 am

      Not like the majority of PM bulls haven’t been saying the same damn thing for months but yes…..

      I’ve suggested time and time again over the past few months that “these levels in general” are good starter / building in both the metals and the miners…currently in EXK as well eyeing several others.

      Only caution that things “could” continue to trade sideways down here for longer than most expect / can bear.

      If QE comes back in vouge, we’ll have to see if:

      1. Investors view it as “complete and total chaos / panic” in the U.S = PM’s finally take off.
      2. Fed “sticks it to the paper markets” as with past QE in attempt to continue masking the true devaluation of U.S.

      I hate speculating about these things ( well….actually LOVE speculating, just hate writing it down ) as….there are still a couple “unknowns” on the horizon.

      My best case scenario has QE full on, global investment community freaks out, PM’s to the moon but……

      In today’s markets? May be holding my breath.

      • Power Corrupts February 3, 2014 / 7:24 am

        I know. The monthly swing low in the miners is a new development though. I recently saw some research by a guy named Chris Kimble where he charted the S&P versus the miners over the last 15 years or so. He pointed out distinct periods where they are negatively and positively correlated. We have been in a period of negative correlation for the last few years, so he conjectured IF the S&P is topping out perhaps the miners will reverse course as well. From a valuation basis, they are very cheap and a mean reversion back to overvaluation will no doubt occur at some point. Perhaps January’s swing low is (finally) the start of the move. Or not – I’m patient…

        • Forex Kong February 3, 2014 / 7:35 am

          This mirrors my thinking, although I can’t rule out further sideways action down here.

          You’ve got it though – looking at it “long, long term” gold is gold, silver is silver, and miners get them out of the ground.

          At some point we’ll look back and see it as “the trade of the century” – if of course you can get on board, then hang on for the ride.

          Medium term I like the idea of “stocks down, PM’s and miners up” exactly as you’ve outlined it.

  3. GM February 3, 2014 / 8:18 am

    Hey Kong!
    I see that the Aussie is bouncing a little bit, and pulled out weekly/monthly charts to see that there are huge RSI divergences forming there… What’s your take on this?

    • Forex Kong February 3, 2014 / 8:34 am

      It’s muddy, but flagging on the daily in my view.

      “Bear flagging”.

      Hang tight. I’m chipping away at it here across a number of pairs….looking for the next show to drop.

      • Farhan Nasir (@FaniNasir) February 3, 2014 / 8:52 am

        what do you think about upcoming Aussie interest rate meeting ,, if they lower the rates then it ll fall , and if they keep it unchanged it will still fall like NZD did last week ,,
        what do you say kong

        • Forex Kong February 3, 2014 / 9:07 am

          We are now in an environment ( or supposedly ) of potencially rising rates, as QE comes off ( he he he ….) so….

          I find it difficult to imagine a “rate cut” out of AUD – BUT!

          I think the RBA is doing a creat job of continually “talking down the Aussie”.

          I don’t trade on these Central Bank announcements. I trade “after them”.

          • Forex Kong February 3, 2014 / 9:10 am

            Bottom line guys……….

            I’m bearish as all hell AUD.

      • GM February 3, 2014 / 10:40 am

        Cool, thanks!

  4. Farhan Nasir (@FaniNasir) February 3, 2014 / 9:13 am

    a quick move against dollar ,, looks like more opportunity to Long USD from a higher ground ,,

    • Forex Kong February 3, 2014 / 9:15 am

      Booom……see why I use small orders over time?

      Guess what I just did??


  5. illutionz February 3, 2014 / 10:07 am

    Closed a bunch of position on Friday except EUR/JPY. Initiated Short GBP/JPY and on Sunday night, initiated AUD/JPY short.

    EUR/JPY continued lower
    GBP/JPY short is now can be classified as a monster trade
    AUD/JPY is also lower now.


    • Forex Kong February 3, 2014 / 10:14 am

      Feels like I’m the only guy on Earth making money here….

      I still can’t understand why/how people get so “attached” to a position, and view the downside like the plauge?

      It’s a market. Prices go up. Prices go down. Pretty standard.

      • Forex Kong February 3, 2014 / 10:34 am

        There’s the “monthly swing high” on SP 500.

        Talk about a timely post.

      • illutionz February 3, 2014 / 10:47 am

        Aye my friend. I actually love short position more than long. Call me contrarian but it’s more funny to see people’s pale face when they see everything is in red. Yet I’m laughing my way to the bank!

        • Forex Kong February 3, 2014 / 10:59 am

          I too make far better / faster / easier money on the downside.

          Freaked out retail investors, beat a grinding “fake Fed market” any day.

      • JSkogs February 3, 2014 / 11:05 am

        Yup. I’ve been just hanging out. I entered a small Yolo kinda trade with usdcad on Friday that is in proper shape but other than that just been chillin. At this point I’d rather sit because I’ve missed the good timing

        • Forex Kong February 3, 2014 / 11:25 am

          I’ve jumped on this hard as of last week pushing it for all I can, with opportunities being so scattered.

          For the amount of hours / time – I can appreciate its not for everyone, let alone those with “other” responsibilities etc…

          I’ve literally “lived and breathed” this move for days, and frankly am pretty beat.

      • JSkogs February 3, 2014 / 12:07 pm

        Haha good job though. I actually wished I could have stayed on this but you are right. I was in and out of all sorts of other responsibilities the last couple days of trade so I had to play it safe. Great trading though man!

  6. devilyell February 3, 2014 / 6:01 pm

    It is the fractal nature of the markets…Not mystical, simply the result of human behavior that is usually wrong.

    I too love the short side. It is usually more money and faster made when the herd runs for the exits.
    The mother of all shorts will come when the money printing (QE) and massive borrowing finally hits the fan.
    Inflation will inevitably rise and conventional investments will tumble. Maybe tomorrow or maybe Feb. 2015??
    They have the power and means to postpone the inevitable for a while, but ultimately they will sell most of us sleepwalkers into slavery in all of it’s forms.

    New campaign slogan…Sell a kidney and eat tomorrow!

    • Forex Kong February 3, 2014 / 6:17 pm

      Well said Dev.

      I too feel they’ll kick the can “a touch longer” – with 2014 chopping around, but with a generally “bearish angle”.

      The majority will indeed try to “buy the dips” and grow frustrated not realizing that it’s more a “sell the rips” kind of environment…

      Unless of course ( or I should say “when” ) The Fed cranks up the presses again.

      Dow down -326 in a day…..I wonder how many got caught on the wrong side of that. It would take an aweful lot ( as U.S earnings, as well forward guidance, as well economic data all point lower ) to just “put this back right”.

      What possible catalyst could one imagine short of Fed “tapers the taper” and cranks QE up again to push bloated stock prices to new highs?

      This I gotta see.

    • JSkogs February 3, 2014 / 7:28 pm

      Hilarious! Ya I think you can count on them cranking it up….until they can’t. Which in all likelihood is still probably a fair distance out.

      • Ze Weziman February 3, 2014 / 11:21 pm

        Knog, what say you about the AUD bounce of all bounce this morning??

        • Forex Kong February 4, 2014 / 7:16 am

          Yes indeed.

          We’ve got to pay closer attention to dates / news and Central Bank releases as last night was RBA statement – leaving interest rates ” as is”.

          Apparently the market thinks this is good for AUD….I think it’s a dead cat bounce.

          I’m adding and remain short.

  7. JSkogs February 3, 2014 / 10:47 pm

    Sort of looks like this is where our bounce will roughly begin

  8. Farhan Nasir (@FaniNasir) February 4, 2014 / 3:35 am

    Kong ,, the comments from the RBA well looks like they are gonna halt on the downside and are gonna keep it up a little ,, no more easing from RBA for some time now means AUD might get some recovery ,,

    • Forex Kong February 4, 2014 / 7:18 am

      I’m seeing it as a pretty pesky little bounce, but also provided some fantastic entries short as I was out of AUD/JPY as well all other AUD pairs short of AUD/USD, with usual small order, now doubled, and will double again if it continues higher.

      Small orders over time, and you don’t get caught leaning to heavy right?

      • Farhan Nasir (@FaniNasir) February 4, 2014 / 8:17 am

        absolutely right ,,
        yesterday took a little long GBP/AUD booked some profit and got out ,, did the same with AUD/JPY ..
        now AUD/USD well just entered a small position at current price ,, lets see what comes next ,, all hands on deck ,,

        • Forex Kong February 4, 2014 / 8:20 am

          You are looking goog Farhan – take those profits when you see them!

          • Forex Kong February 4, 2014 / 9:10 am

            Common already USD! For all reading / following……

            You see how / why trading during the U.S Session is usually a big freakin waste of time??

            Obviously its headed higher…but of course…no – let’s just grind all freakin day.

            All trades looking good.

  9. Zeny February 4, 2014 / 3:51 am

    I love reading this article, thank you for sharing something useful

    • Forex Kong February 4, 2014 / 7:21 am

      Traders get to focused on short term action to consider “wait a minute”! I better get outta here all together!

      Monthly charts are slow, and provide little tradeable information UNTIL OF COURSE……they do.

      You must respect the monthly chart, as the higher up the time frames we climb, and the further we “zoom out” – the more significant the levels of support and resistance.

      Reversal on a monthly chart? Serious implications.

      • Forex Kong February 4, 2014 / 7:43 am

        I’m holding short EUR/USD, GBP/USD as well long USD/CHF and CAD/CHF…..still waiting ( GRRRRR ) for the next move up in USD.

  10. Farhan Nasir (@FaniNasir) February 4, 2014 / 8:50 am

    will definitely take the profits ,, now just have to wait for this Aussie bounce to end ,,
    this area well one can expect a reversal from here ,,

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