The Velocity of Price

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The Velocity of Price

Postby bforex » Mon May 17, 2010 9:38 am

Every technician has their take on not only how to measure the velocity of price, but whether longs and shorts move at the same speed when they rise and fall. We are of the school of thought that believes shorts will invariable fall faster than longs. Look at the macro chart perspectives below. One way to look at price velocity is through the slope of the trend line when holding all variables equal.

The bottom has fallen out here for Oil. It took Oil 4 sessions to crack the 200 day MA. You can see there was a period of consolidation around the 200 MA before the second sell off began. Oil now sits at the handle that started off the latest bull run. A close below that handle would signal further weakness. Using a Fibonacci Retrace from the 2008 low to the most recent high we see that Oil just closed below the 23.6% Fibonacci Retrace, near 74. The next target sits just north of 66. A very precipitous fall when you consider how long it took to reach the recent high.

The EUR is treading on some dangerous ground. The most recent major low reached by the EUR during the initial onset of financial crisis back in 2008 was just north of a 1.23 handle. The EUR now sits 50 pips away from that level. Every high and low is significant as it represents the collective markets value for a particular currency. Said another way, why didn't the EUR hit 1.22 instead of 1.23? 1.23 was the fair market value buyers were willing to purchase the EUR. From that point forward the ratio of EUR buyers to Sellers increased. If this level up Support holds we may see buyers slowly come in and begin to bid up the EUR, however, if there continues to be more Sellers than buyers in the market place then a close below this level may trigger then next round of EUR bears to come out of hibernation, thereby push prices lower at an accelerated speed.

Although the CHF traded below parity to end 2009 it has given up tremendous ground. The Moving Averages, 50, 100, and 200 are in an order consistent with depreciating CHF price levels. Unfortunately for the Swiss Franc, Friday's price action closed above the 61.8% Fibonacci Retrace level generated from the 2009 high and low. The next level Fibonacci targets is just north of 1.15. The CHF and Gold typically have a positively correlated price relationship, but in the last 2 weeks it has not held even as Gold has reached new highs. As many analysts feel Gold may be overbought this will prove even more difficult on the CHF as it is unlikely to appreciate on a correction in the price of Gold.

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Re: The Velocity of Price

Postby tiptip » Sat Jun 11, 2016 8:31 pm

thanks for sharing about the velocity in trading.

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