Friday  26 February 2010

Many time a turn in price direction will occur when there is a clustering of closes.  The reasoning is because
a cluster of closes reflects an on-going "battle" between the forces of supply and demand, buyers v sellers.
It may not be ending action for a trend, but it can often be stopping action, for a period of time.

We talk most frequently about the 50% retracement area of a move to denote a relative measure of
strength or weakness.  Here, we have included a Fibonacci retracement range to show how price is
clustering between the 50% level and a .618 retracement.  Just as we mentioned in the British Pound
article that nothing is ever exact, because in the Pound price had marginally broken the 50% level, and
in the Euro, 50% was also broken, but .618 is holding.  See British Pound - Reaching Support? , [click on
http://bit.ly/91sAOb, 4th paragraph].

[We are writing this article early in the trading day, and price has been rallying as we write.] 

What makes the clustering observation more pertinent is the addition of volume, noted on the bottom
of the chart.  It has been increasing while price has been declining, but the net decline was treading
water, in terms of results.  The volume and price activity, at this juncture, reflects a transfer of risk from
longs to shorts, letting let short sellers in...those who "do not want to miss the move."

Where we mentioned the British Pound was on a "watch alert," the Euro is a more pressing issue.  The
Euro may be a buy on breaks, as it continues to exhibit turn-around strength.