Rob Booker Market Notes, February 25, 2011

Feb. 25, 2011: Two Months After Christmas, More Gifts!
The EUR/USD Shows Some Crack The Wallaby Book is Coming Soon
Just when I was starting to give up on the US Dollar, but

couldn’t find a really good fundamental reason to do so, the
EUR/USD turns around and bends over and shows some
crack. We’ll see if the single currency is just teasing. More
on that later.
The Canadian Dollar came back from the dead overnight as

well, which makes no sense at all since oil finally retreated
yesterday. Oil strength usually translates quickly into CAD
strength, but in the Bizzaro World of 2011, correlations don’t
matter. Thankfully, I’ve stopped questioning this insanity
and I’d recommend the same to anyone else burned by the
general breakdown of Stuff That Was Working Just Fine a
Month Ago. Good U.S. economic news is good for the US What is the Wallaby?
Dollar, except when it isn’t. Whatever.
Right now I like temporary CAD strength, CHF weakness; Wallaby Trading is counter-trend trading. For trend-traders, that
temporary to medium-term USD strength; and long-term means that the Wallaby is a method for watching for a pullback on a
weakness of the JPY, especially against the GBP. So: short-term chart to trade with the longer-term trend. For straight-up
contrarians, the Wallaby trade is a step-by-step guide through the
1. I’m long CAD/CHF and gripping tight to the trade. world of trading divergence and looking for peaks and valleys in price
2. I had a short EUR/USD overnight. movement. The book is at the printer. It’s coming soon.
3. I’m planning a long-term GBP/JPY buy to 150.
Page | 1
Rob Booker’s Market Notes | February 24, 2011 | Rob.bz (blog), RobBooker.com (free ebooks + managed accounts), @robbiebooker
Trading involves substantial risk of loss. Past performance is not necessarily indicative of future results.
This is not a trade recommendation and is provided for informational purposes only.
Risk Disclosure
Trading foreign exchange on margin carries a high level of Hypothetical Results:

risk, and may not be suitable for all investors. The high HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY
degree of leverage can work against you as well as for you. INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED
Before deciding to trade foreign exchange you should BELOW. NO REPRESENTATION IS BEING MADE THAT ANY
carefully consider your investment objectives, level of ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR
experience, and risk appetite. The possibility exists that you LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE
FREQUENTLY SHARP DIFFERENCES BETWEEN
could sustain a loss of some or all of your initial investment HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL
and therefore you should not invest money that you cannot RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR
afford to lose. You should be aware of all the risks TRADING PROGRAM.
associated with foreign exchange trading, and seek advice
from an independent financial advisor if you have any ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE
RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH
doubts. THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL
TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO
Not A Trade Recommendation
HYPOTHETICAL TRADING RECORD CAN COMPLETELY
ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL
Nothing in this document should be interpreted as a trade
TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND
recommendation. It should not be relied upon for the purpose of making
LOSSES OR TO ADHERE TO A PARTICULAR TRADING
an investment decision for your own account, or to invest in for Rob’s
PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL
managed account service. You must read and sign a full (regulated)
POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL
disclosure document before investing. Any results listed in this morning
TRADING RESULTS. THERE ARE NUMEROUS OTHER
notes document are hypothetical in nature, unless specifically noted
FACTORS RELATED TO THE MARKETS IN GENERAL OR TO
otherwise, and Rob does not take every trade idea that is listed herein.
THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM
These notes are part of Rob’s daily preparation for trading and are
WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE
provided to you for informational purposes only.
PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS
AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL
TRADING RESULTS.
Page | 2
EUR/USD
: LT 4 HR: Sweet Relief for Dollar Bulls
Katy Perry said it best: You’re hot and
you’re cold, and then you drop 100 pips.
This pair doesn’t know what it wants.
It’s best not to question anything
anymore, or argue about fundamentals.
A move above 1.3862 could bring us to

1.4100 or higher. I’d suspect the
fundamental driver would be European
inflation worries and a lack of the same in
the States.
EUR bulls are getting a gift right now –

and could look for low-risk (tight stop)
entries at the round numeral 1.3700 or
even lower at 1.3650, which is a 50%
retracement and a missed pivot level.
USD bulls are getting sweet relief. But

let’s not get crazy: This pair hasn’t
necessarily started a giant downtrend. If
I were still short, I’d target 1.3700.
Page | 3
EUR/USD 15M: Divergence Success
Trading divergence against the
prominent trend assures two things:
frustration and mocking Twitter posts. It
also eventually works out, and the
corrections can be sharp. Like this one.
The blue 200 SMA is a reasonable target

in these contrarian trades. It’s also a fine
place to move one’s stop to break even
and try for more.
The decisive move below the 200 SMA

doesn’t ensure a stronger move, but it
does suggest there is more to come. A
bounce off the 200 SMA would reaffirm
the trend.
Once the red 62 EMA crosses below the

200 SMA, there is often a very volatile
pullback to the 200 / 62 area – and this
comes without warning. It either
resumes the trend or provides a selling
opportunity, depending on your trading
style.
Page | 4
USD/JPY 4 HR: Classic London Pivot Setup
A Classic London Pivot Trade is my
original pivot trading system: on Day 1 a
daily pivot is missed (the pair finishes
the day without touching it). On the
same day, R3 or S3 is hit as well.
You’ll see in the green circled area that

the USD/JPY on Thursday fell to its red S3
level. It also missed the daily pivot. This is
an early warning sign that the daily pivot
will eventually be hit.
These trades can sometimes take weeks

to play out; this trading style was better
suited to wide drawdowns and worked
nicely with higher leverage.
In the absence of higher leverage or a

tolerance for drawdowns, a trader could
initiate a buy trade with a stop below
81.00, and a first target at 82.50
(Thursday’s missed pivot). Next target
would be 82.80 – the 50% retracement of
the pair’s recent downward stretch.
Page | 5
GBP/CHF 4 HR: Classic London Bridge Falling Down?
My favorite pivot trading pair is either
setting up a brilliant move upward, or
it’s preparing for another giant failure.
The entry zones are clear and I’ll do my
best to be ready.
The pink shaded area is a what I call a

“Trifecta Fib Zone,” and it’s simply a
trade from the 23% retracement level to
the 33%. I have an order to buy at
1.5020, stop 1.4975, target 1.5070.
If we fall below the 0% line at 1.4880,

then 1.4840 is fairly doable: it’s the
missed weekly pivot from the second
week of January (around the 7th).
Below that? Not sure. 1.4550 comes into

view, but that’s so far down there, and
inflation pressures in the UK aren’t going
to abate that quickly. I’d most likely wait
for a good price on a buy trade rather
than trade the move.
Page | 6
CAD/CHF 4 HR: Long and Strong?
Jennifer turned me onto this trade, and
it had a lot of what I look for in a pivot
setup: Giant downward move, a
tendency for the pair to range, and a
sharp reversal off a reversal candle.
I bought at .9403. Stop was at .9340, but

I’m planning on moving that up.
The pair has crossed into the 23% fib

zone, and it’s got a missed pivot from
Wednesday (circled in green) up around
.9520. That’s a good place to move my
stop to break even.
My target is the missed weekly pivot

from this week. At least .9650.
To see more about the plans for this

trade, visit http://Jennifer.bz
Page | 7

Rob Booker Market Notes, February 25, 2011

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Feb. 25, 2011: Two Months After Christmas, More Gifts!

Just when I was starting to give up on the US Dollar, but

The Canadian Dollar came back from the dead overnight as

Trading foreign exchange on margin carries a high level of Hypothetical Results:

A move above 1.3862 could bring us to

EUR bulls are getting a gift right now –

USD bulls are getting sweet relief. But

The blue 200 SMA is a reasonable target

The decisive move below the 200 SMA

Once the red 62 EMA crosses below the

You’ll see in the green circled area that

These trades can sometimes take weeks

In the absence of higher leverage or a

The pink shaded area is a what I call a

If we fall below the 0% line at 1.4880,

Below that? Not sure. 1.4550 comes into

I bought at .9403. Stop was at .9340, but

The pair has crossed into the 23% fib

My target is the missed weekly pivot

To see more about the plans for this

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