EURCAD looked ready to move south following the confirmation of the head and shoulders pattern earlier this month. I mentioned the structure several times in the last few weeks, and by the end of the August 14th session, sellers had confirmed it.
We then had the retest of the level as new resistance between the 16th and 20th. However, by the close on the 21st of August, buyers were back in control.
I rode the EURCAD short from late June at 1.5580 to the August 21st rally. For the record, I did announce that entry in the member’s area. The intent was to add to the position for an eventual move to the 1.4500 region.
The market clearly had other plans. That’s okay though because I had already accounted for the possibility of a failed head and shoulders pattern. So although it wasn’t the ideal outcome, the close back above the neckline wasn’t a total surprise either.
I also made out pretty well. It wasn’t the 20R+ I had in my sights, but the result was still better than 10R, so no complaints here.
Now, every good trader knows the ability to turn on a dime is paramount to one’s success.
What do I mean by that? Essentially, loyalty to a position is a bad thing. I’m paraphrasing Jack Schwager, author of Market Wizards.
You never want a market to reverse on you as the EURCAD did to me recently, but that’s how things go sometimes. The only thing worse than being wrong is staying wrong. In other words, hoping for the market to prove you right.
With that in mind, the EURCAD closing back above what appeared to be a neckline on August 21st was a red flag for bears. It was a sign that buyers were back in control which has been furthered by the last few sessions.
The EURCAD is now challenging 1.5160 resistance. It’s been a key pivot since May, so it only makes sense that this would be a critical battleground between buyers and sellers.
If the pair closes above 1.5160 (New York 5 pm EST), a retest of the area as new support should attract an influx of buying pressure. Key resistance comes in at 1.5315 followed by 1.5450.
Alternatively, bearish price action from 1.5160 would keep pressure on key support at 1.5000.
I won’t attempt trading this on anything lower than the daily time frame. A pair like EURCAD has trouble respecting levels on the intraday time frames, so there’s no sense in trying to force something before the session close at 5 pm EST.