LAST GASP AUSSIE RALLY AHEAD OF SHARP DECLINE - automated forex trading system reviews

LAST GASP AUSSIE RALLY AHEAD OF SHARP DECLINE ~ automated forex trading system reviews

The Aussie-Dollar pair has definitely been testing the patience of traders over the last few weeks, with an extended period of Consolidation above the most recent Uptrend Line. This period of market indecision could either be a setup to resume the current uptrend, or lead to the break of the Uptrend Line to start a downtrend. With the Monthly Range of this pair having been hit (see Trade Manual) and the possible formation of an even larger Pennant taking place, a bearish reversal looks to be the more likely outcome for the rest of 2014.

Both a Pennant and a Small Range have now been formed as the pair slowly drifts sideways below the Uptrend Line. The rally between 1 and 2 and then between 3 and 4 represented the 2 Weekly Ranges that completed the Monthly Range. As with all currency pairs, strong periods of Consolidation are normally formed ahead of either a resumption of the trend or that start of an opposing one.

DAILY CHART - CONSOLIDATION




One reason to support a bearish bias is the fact that we were in a large downtrend that formed with the breakout from a Pennant in 2013. Previous trends can still continue even when the Trend Line has been broken.

DAILY CHART- BROKEN PENNANT

A 2nd reason to expect the depreciation of the Aussie currency is that there have been 3 successive waves of Uptrends and Downtrends that are usually indicative of a large Consolidation setup being formed. The bearish breakout below this Uptrend Line would be the fourth wave and the one that would create the 2nd Resistance point of the Pennant.

DAILY CHART - NEW PENNANT?

Finally, the break of this Uptrend Line is likely to take place based on one of the peculiar aspects of the currency market. Sometimes when there is about to be a trend change, the market will make a last gasp new high or low that changes the angle of the existing Trend Line. When this happens, the market will then break this line to start the new trend.

DAILY CHART- PREVIOUS TREND LINE

The previous Uptrend Line was formed by connecting the S1 and S2 Support points, but when the new high was formed, the 2nd connecting Support point changed to the one below the Pennant.

DAILY CHART - NEW HIGH & TREND LINE

Several other examples of this can be found across all time frames and with all currency pairs.

DAILY CHART - EURO USD

 4 HOUR CHART- USD CAD

15 MINUTE CHART - NZD CHF

These types of Trend Line changes may be thought of as mere coincidences, but the frequency with which they occur makes this unlikely. Traders can use this knowledge to anticipate a trend change especially if the existing trend has had a very long run followed by a period of Consolidation.

The fact that several of the most popular and liquid currency pairs have also been in Consolidation supports the bearish scenario for the Aussie Dollar. Trends have been few and far between in an environment of low volatility and minimal interest rate differentials. Therefore, identifying and knowing how to trade these setups will allow traders to continue to make money.

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EURO USD FINALLY BREAKS SHORT DANGEROUS 100 PIP TRADE - star forex trading system review

EURO USD FINALLY BREAKS SHORT DANGEROUS 100 PIP TRADE ~ star forex trading system review

After what seemed like an eternity, we have finally got what appears to be a meaningful signal from the EURO USD that could indicate the start of a profitable trend. The pair had been meandering sideways for months above the Resistance of a major Monthly Pennant, forming a smaller Pennant on the Daily Chart in the process. Having formed an even smaller Pennant at the Weekly Range following the break of Support of that Pennant, a strong Bearish Candle Signal has now appeared. Although this might represent the start of further USD gains in the months ahead, a closer look at the price targets indicates the potential for short-term volatility that should be avoided.

A look at the first chart shows the large Monthly Pennant that this pair has been in since the end of the sharp gains for the USD in 2008. We can also see the current area of price congestion above the Resistance of this Consolidation and the Inner & Outer Uptrend Lines.

DAILY CHART- MONTHLY PENNANT

A closer look at this area above Resistance shows the Pennant on the Daily Chart that was formed and then subsequently broken. There was a brief pause in this breakout at the Weekly Range to from an even smaller Pennant on top of the Outer Uptrend Line and the Monthly Pennants Resistance. 

DAILY CHART- PENNANT FORMATIONS

As with most types of breakouts from Pennants of this size, the trend usually comes to a temporary end at the Weekly Range before continuing. Having completed this mandatory break, the signal to indicate the continuation of the breakout was given today, July 22, 2014. This candle simultaneously broke the Support of the small Pennant, the Resistance of the Monthly Pennant as well as the Outer Uptrend Line.

DAILY CHART- BREAKOUT SIGNAL

This setup and signal given here are very strong and under most circumstances would justify an entry to go short. However, the proximity of the Breakout Equivalent (BE) to the Breakout Candle of only 100 Pips suggests that a short position may not be that feasible.

With all Consolidations, the BE measures the price at which the breakout is expected to end. If this price is going to be hit ahead of the Weekly Range (WR), the breakout usually ends at the BE. If the WR is closer than the BE, then the market would break beyond the WR to hit the BE. The BE is therefore the price target that Consolidation breakouts will go towards regardless of the proximity of other price targets. However, I have found that if the distance between the start of the breakout and the BE is 100 Pips or smaller, the movement can become volatile and may not actually hit any of its targets. Ideally, a distance of at least 130 Pips is needed to ensure that a strong breakout with minimal volatility will take place.

These rules related to breakouts are very important for traders to be aware of when looking to take advantage of these strong setups. Breakouts can offer very fast and profitable trades and they can be all the more appealing when the market has not been offering that many opportunities. However, the knowledge of and the adherence to these small details can make all the difference between a successfully hit target and an unexpected reversal and trading loss.

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Currency Analyst/Trader

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Twitter: @WorldWide876

Facebook: DRFXTRADING 

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