A Quick Top Down Technical Analysis Process
This video demonstrates how to plot key areas of support and resistance or trendlines on charts.
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Let’s take a clean chart of the DXY and I’ll quickly show you how I go about finding key technical areas on the charts, so whether it’s the Dollar or the AUDJPY or the EURGBP doesn’t matter, I’ll show you a quick list of technical things I look for on any chart.
So, if it’s a chart that I need to mark up from scratch I always like to go up to a higher timeframe like the weekly, sometimes even the monthly and just see where we are in the bigger scheme of things. Are we in any multiyear trends that I need to be aware of, are we at all time highs or lows on these higher timeframes?
So, let’s go to the monthly timeframe, now the first thing that I like to do is look for any major support and resistance areas or major trendlines that I can spot on the chart. I have a very specific rule when it comes to these types of areas that I want to mark up, and that is that I keep them as simple as possible. If I need to go looking for areas of support and resistance then I rather just leave it, I’m looking for areas that are very obvious on the chart, because that way it should be areas where the majority of technicians will see more or less the same thing, if that makes sense.
Now, another thing that’s important for me to note here, time is very previous and we need to be making the most of our time where we can, and that means that I’m not going to be marking out importance zones that are lightyears away from the current price. I only focus my attention on those areas that are close to the current price.
Usually I like to start with marking up the most significant swings and support and resistance areas on the charts. So, on the DXY, that is essentially just two areas on the monthly, which is the clear resistance we can see at the 103 and 100 psychological levels and then this obvious prior resistance turned support at the 88.00 level. Apart from that there is also a trendline if we look at these lows going back to 2012 and extending up to the swing back in 2015.
I don’t try to get fancy and mark up all the minor potential trendlines, just the most obvious ones and then take it from there.
Now, taking a closer look we also have an interesting area of support and resistance where price is currently trading at with the low from 1999, the highs from 2004 and 2005, and more recently support in 2015 and 2016 and roundabout where we are now. What I don’t like about this level though is that there a few big overflows from this zone, remember this is a monthly chart, so these small spill-over spikes are quite massive moves on the smaller timeframes, so I’m a bit sceptical of that one and I’ll leave it out for now.
Right, so what I do now, is drop down to the weekly and see where I can possible refine some of those levels. Starting with the trendline, I think that looks good where it is, currently on a major support area as have been flagged out by numerous technicians and one of the reasons we anticipated some possible mean reversion on the Dollar last week, not the only reason of course but one of the reasons, I just want to make that clear.
Straight away this support and resistance caught my eye just below the 95 psychological level, also nice and recent. Now that other area we saw on the monthly looks a bit clearer now, this area with the lows for 2015 and 2016, so let’s market this up but we’ll look to refine it later. The danger with marking up levels where the price is currently trading at or close to is that we tend to try and curve fit levels to fit where the market is trading at right now, and that’s a real danger for technical analysis like that, which is why I would rather leave something out than try and force it to show something that is not really there, if that makes sense. For now, I’m happy with that as is. We might consider putting in that more recent trendline stretching from the 2014 low to the 2018 low, but we are well past that trendline now and also retested it a few months ago if you recall so for now I’ll just leave the other one on, and let’s drop to the Daily.
And after that you can refine even further by going to the H4 and lower, and that should give you a good idea of how I do a top down technical analysis of a chart, whether it’s the Dollar or any other asset price chart doesn’t really matter, the aim and process is very similar to all of them.
-----
If you find this content helpful, you’ll love Financial Source.
There’s a link below were you can learn more about it
https://financialsource.co
----
We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.
You understand the markets and trade with confidence. Learn more at our website here: https://financialsource.co
-----
Let’s take a clean chart of the DXY and I’ll quickly show you how I go about finding key technical areas on the charts, so whether it’s the Dollar or the AUDJPY or the EURGBP doesn’t matter, I’ll show you a quick list of technical things I look for on any chart.
So, if it’s a chart that I need to mark up from scratch I always like to go up to a higher timeframe like the weekly, sometimes even the monthly and just see where we are in the bigger scheme of things. Are we in any multiyear trends that I need to be aware of, are we at all time highs or lows on these higher timeframes?
So, let’s go to the monthly timeframe, now the first thing that I like to do is look for any major support and resistance areas or major trendlines that I can spot on the chart. I have a very specific rule when it comes to these types of areas that I want to mark up, and that is that I keep them as simple as possible. If I need to go looking for areas of support and resistance then I rather just leave it, I’m looking for areas that are very obvious on the chart, because that way it should be areas where the majority of technicians will see more or less the same thing, if that makes sense.
Now, another thing that’s important for me to note here, time is very previous and we need to be making the most of our time where we can, and that means that I’m not going to be marking out importance zones that are lightyears away from the current price. I only focus my attention on those areas that are close to the current price.
Usually I like to start with marking up the most significant swings and support and resistance areas on the charts. So, on the DXY, that is essentially just two areas on the monthly, which is the clear resistance we can see at the 103 and 100 psychological levels and then this obvious prior resistance turned support at the 88.00 level. Apart from that there is also a trendline if we look at these lows going back to 2012 and extending up to the swing back in 2015.
I don’t try to get fancy and mark up all the minor potential trendlines, just the most obvious ones and then take it from there.
Now, taking a closer look we also have an interesting area of support and resistance where price is currently trading at with the low from 1999, the highs from 2004 and 2005, and more recently support in 2015 and 2016 and roundabout where we are now. What I don’t like about this level though is that there a few big overflows from this zone, remember this is a monthly chart, so these small spill-over spikes are quite massive moves on the smaller timeframes, so I’m a bit sceptical of that one and I’ll leave it out for now.
Right, so what I do now, is drop down to the weekly and see where I can possible refine some of those levels. Starting with the trendline, I think that looks good where it is, currently on a major support area as have been flagged out by numerous technicians and one of the reasons we anticipated some possible mean reversion on the Dollar last week, not the only reason of course but one of the reasons, I just want to make that clear.
Straight away this support and resistance caught my eye just below the 95 psychological level, also nice and recent. Now that other area we saw on the monthly looks a bit clearer now, this area with the lows for 2015 and 2016, so let’s market this up but we’ll look to refine it later. The danger with marking up levels where the price is currently trading at or close to is that we tend to try and curve fit levels to fit where the market is trading at right now, and that’s a real danger for technical analysis like that, which is why I would rather leave something out than try and force it to show something that is not really there, if that makes sense. For now, I’m happy with that as is. We might consider putting in that more recent trendline stretching from the 2014 low to the 2018 low, but we are well past that trendline now and also retested it a few months ago if you recall so for now I’ll just leave the other one on, and let’s drop to the Daily.
And after that you can refine even further by going to the H4 and lower, and that should give you a good idea of how I do a top down technical analysis of a chart, whether it’s the Dollar or any other asset price chart doesn’t really matter, the aim and process is very similar to all of them.
-----
If you find this content helpful, you’ll love Financial Source.
There’s a link below were you can learn more about it
https://financialsource.co
