By the end of last Friday’s session it looked as though the validity of this three-month inverse head and shoulders pattern on EURCAD would be called into question. Although the market was still holding above key support, Friday’s intense selling pressure certainly had buyers thinking twice to start the new week.
It all began after the pair broke free from the neckline on June 2nd, triggering an aggressive rally that lasted three days and advanced the pair 400 pips. This run provided traders a great opportunity to buy into the bullish momentum, myself included.
However the subsequent decline during Friday’s session was even more aggressive as the pair ran into key resistance at 1.4070. This area is represented by the February lows in combination with trend line resistance from March of 2014.
Needless to say this was a prime area for buyers to liquidate their positions going into the weekend, which is exactly what happened as the pair plummeted 300 pips to end the week. But the selling didn’t last long as the bulls battled back during yesterday’s session, erasing 200 of the 300 pips lost on Friday.
From here the 1.3915 level will likely come in as support, however I’m only interested in a daily close above the 1.4070 key resistance level. A break would confirm the continuation of the inverse head and shoulders pattern thus opening up the door for another push higher.
Summary: Wait for a daily close above 1.4070 and then watch for a retest as new support. Key resistance comes in at 1.4212 and 1.4340 with a measured objective of 1.4490.
Hi Justin,
when you said wait for retest as new support, do we still remain on the daily chart to see for the set up?
Sometime in lower time frame may have the set up but in daily time frame still in a single candlestick.
I have few failed trade which happened like this. e.g I’ve experienced a closed pin bar in lower TF (H4 /H1) bouncing back from a trend line but in Daily TF, it was just a candlestick move slightly above trend line but not closed yet. I took the trade unfortunately it goes against my direction. Should I take this trade in this scenario?
Sometime, it may seems as retest in lower time frame but it is not in the Daily time frame…still a moving bar….
If we have to wait for the retrace on Daily chart which we will need few more days or even a week because the
breakout may go strong sometime and retrace at higher resistant level instead of the breakout level. Shall we wait till the retrace to the level where it brokeout ? Appreciate your valuable advice.
It depends on which time frame is respecting the key level. In the case of EURCAD it needs to be the daily.
Cheers,
Justin