Forex Trading Using Intermarket Analysis

TWo monTHs in THe liFe oF a 
CUrrenCy sPread
Let’s examine this chart in more detail.
1 – Hammer.
After trending down, the price opens at about the pre-
vious close and then sinks. But the market rejects the down draft and 
closes higher, a bullish signal that the market has hammered in a bottom. 

---

t r a d e s e c r e t s
78
2 – Crossover signal day with bullish candlestick. 
When the 
predicted 5-day moving average crosses above the actual 5-day 
moving average, it does so on a day with a bullish candlestick, 
increasing chances of a valid buy signal. In this case, the market 
chops around for several days. Depending on your trading style, you 
may have been stopped out of the trade during this period although 
your moving average reading suggests sticking with a long position.
3 – shooting star. 
The market shows some signs of weak-
ness as it opens near the previous close, shoots to a new high 
and then falls sharply as traders reject the higher price level.
4 – shooting star. 
After barely maintaining a long status (predicted 
moving average above the actual moving average), the market again 
makes another shooting star candlestick, reaching the previous high 
before being rejected again, warning that strength may be evaporating.
5 – doji. 
Traders are a bit indecisive about which way to take 
the market as prices move up and down from the open dur-
ing the day before settling at almost the same price as the open. 
A doji signal is a caution flag that adds weight to a pending top.
6 – Bearish engulfing pattern. 
The market opens higher than 
the previous close, then closes sharply lower with a long black 
candle body that engulfs the previous candle’s body. The pre-
dicted moving average drops below the actual moving average on 
the same day. The strong negative candlestick reinforces the mov-
ing average crossover that signals a reversal to a bearish trend. A 
sell stop placed below the low of 6 would close out the previous 
long position and catch the new trend, if a downtrend materializes. 
7 – Harami. 
The market isn’t quite sure it wants to head down 
yet as price action on this day remains within the boundar-
ies of the previous candlestick’s price range – an inside day in 

---

79
ForeX trading using interMarket anaLysis
Western terms. It isn’t until the following day that prices drop 
below the low of 6 and trigger the entry into a short position.