Want more price action setups? Join our Exclusive Member’s Community
AUDCAD is a pair that I rarely talk about and trade even less. This is mostly due to the choppy price action that the pair often exhibits. However the activity over the past eight months combined with recent developments have formed a pattern that is hard to ignore.
The head and shoulders pattern I’m referring to is best seen on the weekly chart.
But one thing is missing – we need a daily close below the neckline at .9410 in order to confirm the pattern. A daily close below .9410 would also prompt us to begin watching for a retest of the level as new resistance.
For those of you who have followed me for a while, you know that I like to view patterns like this in the context of broader market movements. Not only does this help us to determine whether a setup is worth taking, it also gives us an idea as to where the market may be going.
For that we turn to the weekly chart once more, only this time we’ve zoomed out to get a better view of where this head and shoulders pattern is forming.
We get this by using a measured objective. To be fair, it’s actually 940 pips from the neckline to the head and 840 pips from the neckline to .8570, however measured objectives are rarely spot on.
Of course any pattern on the weekly time frame is going to require an adequate amount of patience. Even a break of .9410 could take days or even weeks to be realized.
The major benefit to confirming a reversal of this magnitude is that you can often ride the trend for several weeks or even months if you play it right. For now, we’ll continue to monitor this pattern for any new developments in the coming sessions.
Summary: Wait for a daily close below .9410 and then watch for a retest of the level as new resistance. More conservative traders can wait for a weekly close below the level before considering a short entry. Key channel support and measured objective come in at .8570.
