Just as there are many schools of thought on how to profit from the financial markets, there are often multiple ways to approach a single pattern on your chart.
On Tuesday just hours before the results from the U.S. election started pouring in I pointed out what appears to be an inverse head and shoulders on the AUDNZD. And although not yet confirmed, the potential is still intact.
But the successful completion of the pattern will depend on the 4-hour descending channel in the chart below. Technically, this is what kept the pair afloat during the extreme volatility just two nights ago.
Whether this channel becomes tradable depends on if and where resistance eventually gives way.
If it becomes tradable in the coming sessions, it’s going to require sound risk management. The distance between channel resistance and 1.0765 doesn’t leave much room for a stop loss to secure a favorable risk to reward ratio, particularly in these volatile conditions.
As for me, I prefer waiting for a daily close above the 1.0765 handle before considering an entry. With 530 pips between the neckline and measured objective at 1.1295, there’s no rush to get in, and I’d rather have the conviction of a confirmed reversal pattern on the daily chart before risking capital.
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