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Today we start with a pattern that at first glance looks bearish, but actually as bullish implications. EURCAD has been in a downtrend since the head and shoulders pattern formed back in March of this year. Since that time the pair has lost 1,300 pips.
The pattern in focus is this falling wedge. At first glance this simply looks like a market that’s making lower highs and lower lows. However when a falling wedge like this forms at the lower extremities of a downtrend, there’s often a good chance of a reversal.
That reversal potential will only come on a daily close above the upper level of this wedge. Because the level is so well defined, a break on the 4 hour chart can also be used as a more aggressive approach to entering the market.
Alternatively, bearish price action at current levels could have us looking lower as the market may retest wedge support before continuing higher.
Summary: Wait for a close above wedge resistance on the 4 hour or daily time frames and then watch for bearish price action. Alternatively, bearish price action at current levels would have us looking to wedge support. Key resistance comes in at 1.4440 and 1.4730.
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