Study Guide for Come Into My Trading Room - Forex Factory

182 CASE STUDIES
Trade 5: Wheat—Exit Answer
Chart A5-c
entry
long
A B C D E
Wheat slowly gathers steam, as it starts rallying from its multiyear low.
Its daily ranges are narrow and prices do not outrun the EMAs very far.
Slow rallies tend to persist longer than wild affairs. Still, it would be
tempting to take profits in area A, after wheat manages to put some air
between itself and its moving averages.
Area B offers a good opportunity to reestablish longs or to add to the
existing ones when wheat pokes into the value zone between the two
EMAs. A conscientious trader calculates his EMAs daily, projects them
one day ahead, and places his entry orders accordingly.
After touching its EMAs in area B, wheat explodes into area C, where
it offers a perfect profit-taking opportunity. Prices blow out of their
channel into overvalued territory, accompanied by a bearish divergence
of Force Index, which shows that prices are rising only out of inertia,
as bulls have less force.
Prices sink back to their EMAs in area D, tempting traders to reposition
long; only instead of rallying they continue to sink, hitting stops.
In area E both EMAs turn down, canceling the buy signal altogether.
This is the end of the bullish campaign in wheat for the time being.