Channels are by far my favorite way to identify opportunities.
They occur more frequently than most realize and they can offer incredibly precise entries and exits to those with enough patience.
In fact, I’m convinced that you could develop an entire trading edge around nothing but ascending and descending channels.
USDCAD has formed two such channels recently.
There is a sizeable ascending structure that extends from the April low and June high.
Then there is the smaller one that began in October.
One of my rules for trading channels is that I never trade upside breaks of ascending patterns. The same goes for downside breaks of descending ones.
Notice how USDCAD is still holding below the larger channel resistance.
However, the pair recently broke to the upside of the smaller pattern. That type of break is more likely to be false than anything else.
Which brings us to today’s price action…
If the USDCAD closes the day below the 1.3550 area, it could set up a favorable short opportunity.
Are you using New York close charts? If not, you’re exposing yourself to ‘false’ price action signals.
Go here to get instant access to the same charts I use.
I will personally look for an entry up around 1.3565. This is the intersection of the smaller channel top and a horizontal level that has been in place since December 24th.
Note that the pair is also in the process of carving a weekly bearish engulfing pattern.
It’s a close call, but this week’s high did extend a few pips above last week’s. It’s one more sign that the pair may have reached a top, at least in the short-term.
As for a target, I’d keep an eye on the larger channel support. That could be anywhere from 1.3000 to 1.3100 depending on the selling pressure.
USDCAD sellers will also need to get through the smaller channel support. That level will likely come in somewhere near 1.3400.
In summary, a daily close below 1.3550 would establish a short opportunity from the 1.3565 (new) resistance area with targets of 1.3400 and 1.3000/100.
Save 40% on a Lifetime Membership to Daily Price Action – Ends January 31st!
Click Here to start profiting with Justin.