Daily Price Action
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EURGBP Breakout Presents New Challenge for Buyers

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On August 16th we looked at a rising wedge that had formed on the EURGBP 4-hour chart. At the time the pair was trading at 0.9104 and hadn’t yet broken free from the ascending pattern.

Fast forward to today and we can see that the Euro cross is trading above former wedge resistance. Buyers closed the pair above the level during the August 23rd session and subsequently held their ground during the August 24/25th retest as new support.

EURGBP 4-hour rising wedge

Despite last week’s breakout, I didn’t consider going long. One of my rules is to avoid buying into bullish exhaustion patterns or selling into formations that suggest bearish exhaustion.

The reason for this rule has everything to do with the potential for false breaks. In my experience, a break like the one we saw last week on the EURGBP has a 50/50 chance of being a false break. That’s a pure gamble which is enough to keep me on the sideline.

Moreover, Friday’s high tested the upper boundary of a new ascending channel that extends from the May low. The resistance area shown in the chart below is yet another reason I’m not interested in buying the pair at current levels.

I’m going to stand aside for now and wait for a favorable opportunity to present itself. Bearish price action near 0.9270 would be appealing, but former 4-hour wedge resistance at 0.9210/20 wouldn’t allow for a favorable risk to reward.

On the other hand, a close below 0.9210/20 would indicate that sellers are beginning to take back control. However, the highest probability setup would be a close below the 0.9144 handle in my opinion.

For those interested in going long, a pullback into 0.9144 or perhaps channel support near 0.9000 would be worth a second look.

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EURGBP ascending channel

Leave a Comment:

10 comments
davy says

How can you be sure that the trend is over.

Reply
    Justin Bennett says

    I didn’t say that, not even close. Trading is never about being sure of what the market will or will not do.

    Reply
Rob says

you dont mention the daily inside bar on Aug 24 which has formed in this nice uptrend, a major support level also lays at 0.95987 ( high of early october 2016 ) therefore giving this uptrend a descent possibility to move higher in my opinion….

Reply
Rob says

Always makes me smile when I see some selective lines put on a graph to pretened a pattern has been followed in order to write an article to get subscribers.
Forex trading already has enough challenges without this type of mis-information

Reply
    Justin Bennett says

    Rob, it would appear that nobody was pretending (as you say) that a resistance level exists near the area I highlighted above. Channel extensions like the one I used here are a simple way to identify support/resistance areas.

    You can learn more about the technique here: http://bit.ly/2nODVYt

    Reply
Toscana says

Always makes me wonder why care to write these senseless comments, Rob? I have my own tech approach and often disagree with analyses and clues given here but i find Justin’s doing great doing – he’s persistant in his methodology and he day by day suggests at least a lot to think of, not to mention some good trading ideas. As for getting more subsribers… Mike Bellafiore’s firm makes good money trading and still fights for subsribers and students.

Reply
Roy says

I think Rob is entitled to his opinion about forex but justin makes sound judgement on trading decisions and that is a good thing.
we can agree to disagree i guess.

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indra says

thankyou so much justin for the analisis…should you give us how to set sl and tp thx

Reply
    OkoroDiop says

    I will advise for you to take a course. It’s worth the investment. You can not depent trading in his views. invest in yourself

    Reply
    Justin Bennett says

    You’re welcome.

    Reply
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