The EURCAD retested a significant level last week. The trend line that extends from December 2015 is what triggered the recent 420 pip selloff. It’s also a level that could represent the neckline of a 2,000 pip head and shoulders pattern.
I first mentioned the potential reversal pattern in mid-October of last year. It has since come up a few more times in the daily commentaries, but we never quite got the retest of the neckline to justify an entry.
However, last week the pair finally retested the level as new resistance.
In fact, sellers carved out a 4-hour bearish pin bar following the March 27th retest.
I mentioned the sell setup in the member’s area, and I know quite a few who took full advantage of the 300+ pip drop that followed.
You may have also noticed the weekly bearish engulfing pattern in the first chart above. That candle sets the foundation for what could be a selling opportunity within the next few sessions.
So what’s the gameplan?
Yesterday’s bullish engulfing day has triggered a bit of a relief rally. But that’s a good thing if you’re looking to sell at a higher price.
Speaking of a higher price, the 1.4380 handle is the level I’m eyeing. It’s the 2011 high and has been influential ever since. It’s also the 50% retracement of last week’s bearish engulfing pattern.
If buyers fail to reach this area, there is an intraday ascending channel forming which could offer an opportunity. This second option would kick in should the pair fail to hit 1.4380 over the coming sessions.
But for now, my sights are set on the 1.4380 area.
Key support comes in at this week’s low of 1.4170. A daily close below that would expose 1.4040 followed by the 2016 and (current) 2017 lows near 1.3820.
Only a daily close above the 1.4380 area would negate the bearish outlook for the pair.
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