CAD CHF TREND LINE BREAK AS EXPECTED BUT WHAT NEXT - forex trading system resources

CAD CHF TREND LINE BREAK AS EXPECTED BUT WHAT NEXT ~ forex trading system resources

Having broken the Outer Uptrend Line as expected, the CAD CHF is now at a bit of a crossroads. The Double Tops that were formed were strong enough to lead to the bearish break, but may not be enough to push the pair down much farther. We could see the formation of a Range that eventually leads to the start of a downtrend, but if we see a strong Bull Candle above the Counter Trend Line (CTL) the Uptrend could continue.

Daily Chart below shows the breakout that took place below the Inner and Outer Trend Lines. Supporting this breakout were the Double Tops and the fact that we had rallied by  600 Pips, exceeding the Monthly Range for this pair.

DAILY CHART

Despite this break, the Double Tops seen here were too weak to start a significant downtrend. The first part of this pattern was strong, but the weakness of the candles for the 2nd `Top` rendered the signal too weak.

DAILY CHART

The candles shown here, however, are closer to what we would expect for Double Tops.

DAILY CHART

So what can we expect at this juncture? Well one of two options. 

SCENARIO 1 - CONSOLIDATION ?

Since this breakout may not take place right away, the market could go into a period of Consolidation in the form of a Range. This is typically what you will see when the Monthly Range is hit and/or a Trend Change is going to take place.

DAILY CHART- RANGE SETUP?

We would see a rally to form the 2nd Support to complete the Range followed by a U-turn to breakout bearish. The new trend would be formed as the Swiss Franc regains lost ground against the Loonie.

SCENARIO 2 - RESUMPTION OF UPTREND ?

The Uptrend could actually resume with a simple Bullish Candle and break of the Counter Trend Line (CTL). Even though we are at the Monthly Range of the currency pair, trends can also continue once the setup and signals are strong enough.

DAILY CHART

Until the market shows us its cards, lets wait on the sidelines and then take appropriate action. Get familiar with how to trade these setups and then enjoy the Pips as they continue to roll in using my Methodology.

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USD CHF 100s OF PIPS BULLISH OR BEARISH - forex trading system reviews

USD CHF 100s OF PIPS BULLISH OR BEARISH ~ forex trading system reviews

Hundreds of Pips in either direction appear to be possible for the next few weeks if we see strong Bullish or Bearish breakout signals. The Weekly Range has recently been hit after a very long and slow trend and has now settled above a major Downtrend Line. A convincing Bullish Candle break above Resistance would put the 0,9400 area in play, while a break short to also take out the Uptrend Line would make 0,8700 the long-term bearish target.

The currency pair has started to move within a small Range above the Inner Uptrend Line, following a rally to the 0,9100 area.

DAILY CHART

The gains for the Swiss Franc also put the pair above a major Outer Trend Line of a previous Downtrend.


DAILY CHART

As you can see, the recent uptrend was part of a break from the Inner Trend Line to the Outer Trend Line of that Downtrend. From this point, the market could either break higher for an even stronger Uptrend or break lower to resume the overall Downtrend. In continuing higher, the Daily Chart would first have to break the Resistance of its current Range setup.

DAILY CHART

The first major target would be the next Weekly Range which would be at the 0,9435 area. Short-term targets will be hit along the way as traders exit profitable positions in this new uptrend. Equally profitable targets could also be hit going short if there is a breakout bearish from this Range along with a break of the Outer Uptrend Line.

DAILY CHART

Before breaking bearish, the currency pair could actually spend a little longer in this Range to carry it closer to the Outer Trend Line. At times, trend changes that involve Consolidation breakouts tend to take place simultaneously with Trend Line breaks to make the start of the new trend even more convincing (TRADE TIP).

See how the concept of the Weekly Range and Consolidation breakouts worked on past trades in the Free Preview of the Trading Manual;

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USD CAD AT MAJOR TREND LINE STRONG RALLY AHEAD - forex trading system scams

USD CAD AT MAJOR TREND LINE STRONG RALLY AHEAD ~ forex trading system scams

The USD CAD is now just above a major Uptrend Line following a recent downtrend that led to strong gains for the Loonie. With this Uptrend Line having defined the direction of the pair since 2012, we could either see a strong rally above the current Downtrend Line or a major break to resume the downtrend.

This Uptrend Line supported a very strong rally that carried the currency pair from 0,9632 in September 2012 to the high of 1,1277 in March 2014. We can also see that there were four previous rallies at this Trend Line, indicating the strength of this boundary.

DAILY CHART

Looking at the recent downtrend that has carried us to this Trend Line once more, we can see that it provided a trading opportunity when a Range setup was broken. Entry at the breakout candle could have given the trader a little over 100 Pips with the exit taking place above the Uptrend Line.

DAILY CHART

From this point, the currency pair can either rally to break the Downtrend Line or break below the Uptrend Line. If it does rally, it can do so with a direct break of the Downtrend Line followed by a test and then a further break long. Alternately, it could also move sideways in a Consolidation before breaking out. Such a setup could also be the precursor to a breakout short below the Uptrend Line.

DAILY CHART

With the pair already reaching its 2nd Weekly Range, however, further moves bearish could be limited if we dont see a large setup formed in the near future (see Trade Manual). This would give the break of the Downtrend Line a higher probability of taking place, providing a larger range of pip targets to choose from.

As with all scenario analyses, one will have to wait for the best signals to be provided by the market to justify entry. In this very low volatility environment of few opportunities, one will have to be sharp to monitor several currencies at a time to be able to spot these rare, but profitable trades.

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EURO CAD AT MAJOR TREND LINE MAJOR REVERSAL - free forex trading system software

EURO CAD AT MAJOR TREND LINE MAJOR REVERSAL ~ free forex trading system software

After completing a large Bear Crown Setup on the Daily Chart, the currency pair declined significantly to complete its 2nd Weekly Range in favour of the Canadian Dollar. Traders who were lucky enough to have traded in this direction, would have been able to capture some of the 700 Pips on offer throughout this decline.

DAILY CHART

Having now exited from their short positions, traders would now be patiently contemplating the next move for this pair. Given the fact that we have settled on top of a major Uptrend Line that has been in place since 2012, they will have to especially careful with what takes place next.

DAILY CHART

In general, whenever trend lines are hit, there is usually a pullback that leads to a trend reversal or a break to continue the existing movement. However, the more significant the Trend Line the greater the likelihood of a reversal to either start a new trend or resume the major trend that had been defined by this Trend Line. With the Currency Pair having hit such a significant Trend Line and the fact that we have also come to the end of the Monthly Range, we are likely to see a strong rally that resumes the overall uptrend.

DAILY CHART

Such a rally would not take place in a very short time, however, as currencies tend to move sideways in the form of a Range or Pennant before starting a new trend. This tends to happen at major Trend Lines, Weekly & Monthly Ranges and the Support & Resistance of major Consolidations. As such we are likely to see a long period of volatility before a clear trading opportunity takes place. But when it does start, several hundreds of pips are likely to be on offer as they were in this recent downtrend.

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AUD USD STRONG RALLY OR FALSE BREAKOUT AHEAD - forex news trading system

AUD USD STRONG RALLY OR FALSE BREAKOUT AHEAD ~ forex news trading system

The Range Setup on this pair was finally broken with a strong bull candle breakout signal. This signal - a Normal Candle - has also broken the strong Downtrend Line that was formed with the breakout from the large Pennant Setup started in November of 2014. Given these strong bullish technical signals that point to the start of a strong breakout, many traders would be getting ready to capture hundreds of Pips from this expected rally. However, as attractive as this setup is, there a 3 other important, more dominant technical factors that may lead to either a False Breakout or a breakout that is volatile and risky to trade.

The breakout candle that was given on Monday April 28 can be seen in the Daily Chart below.

DAILY CHART- BREAKOUT SIGNAL

From Section 8 of the 2nd Part of the Trading Manual, we can see that this candle which broke above the Resistance, complies with all of the requirements of a Normal Candle that would usually make this a tradeable setup.

Even though the Stop Loss on the 4 Hour Chart would not meet the 4th criterion in the Trade Sheet for an immediate “ENTRY USING THE DAILY CANDLE”...;

4 HOUR CHART - BREAKOUT SETUP

...we would simply wait for a follow-up signal that meets the next set of criteria and trade accordingly. Nevertheless, due to 3 important, overriding factors about this pair’s setup, we are unlikely to reach or need to wait on this signal.

Trends eventually come to an end and the Range Setup that we have here can lead to the start of a new trend. However, there usually tends to be a major factor or combination of reasons that dictate when this trend change will take place - reasons that are not yet seen for this pair.

THE BREAKOUT EQUIVALENT OF THE PENNANT

Major trend changes can occur if the Breakout Equivalent of a large Consolidation has been hit. Since these areas generally lead to strong pullbacks, they can lead to a gradually change in the overall trend of a pair. The larger the Consolidation, the stronger the expected pullback and the more likely that a new trend direction materializes.

In the current scenario, we can see that the Pennant Setup that was broken was fairly large. Based on how the Breakout Equivalent of these Large Pennants is measured, this area would lie below the Outer Uptrend Line.

DAILY CHART - PENNANT BREAKOUT EQUIVALENT

TREND LINE BOUNCE

Significant trend changes also take place when major Trend Lines have been hit. The momentum that the pullbacks at these areas normally produce is usually strong enough to lead to a new trend. The Outer Uptrend Line on this pair has been in place since early 2001, forming its 2nd Support point between 2008 and 2009 when global Risk-Appetite returned to the financial markets.

DAILY CHART- NO TREND LINE BOUNCE

As can be seen here, we are still some distance away from this important Trend Line. This could therefore reduce the strength of any bullish U-Turn that takes place in an attempt to resume the overall Uptrend of this pair.

SIZE OF THE SETUPS

Despite the significance of Trend Line Bounces in leading to major U-Turns, successful reversals can still take place without these boundaries being hit. Nevertheless, the setups that would allow for this are normally large and in sync with the previous setups that formed that Trend Line. The charts below show that the two Support Points that formed the Outer Uptrend Line were noticeable larger than the current Range Setup.

  

1ST SUPPORT POINT SETUP

These were a pair of wide Double Bottoms that were formed over a 6- month period between the end of March and the end of September of 2001.

2ND SUPPORT POINT SETUP

This setup was a fairly large Pennant Setup that also took 6 months to be formed between 2008 and 2009 before leading to the sharp 3-year breakout.

CURRENT RANGE SETUP

This present Range Setup is very small in comparison to those previous Support Points and has taken only 3 months to be formed. These factors give it a very low probability of leading to a breakout similar in size to those that started in 2001 and 2009.

In the absence of a stronger setup and convincing technical factors, preference for the existing trend is always preferred. It is still possible for the pair to rally for several hundred pips, but it is more likely that either a False Breakout or a volatile rally that is difficult to trade takes place.

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DO WE TRADE THIS TEMPTING 70 PIP USD CHF SIGNAL - best forex trading system robot

DO WE TRADE THIS TEMPTING 70 PIP USD CHF SIGNAL ~ best forex trading system robot

Earlier this week, the USD CHF gave us a Bull Candle breakout from the Resistance of its Pennant setup, with the intention of moving towards the Outer Downtrend Line 70 Pips away. While this might appear to be a comfortable trade for those who trade these smaller moves, a closer look at the Daily Chart will reveal why taking this trade may be a risky move.

As you can see from the charts, the currency pair has already broken the Inner Downtrend Line of the strong Downtrend with the aid of a pair of Double Bottoms. With setups such as these, there is always a tendency to move to the Outer Trend Line after a very long trend has ended. 

DAILY CHART - BREAKOUT SIGNAL

DAILY CHART - INNER & OUTER TREND LINES

DAILY CHART- POTENTIAL 70-PIP MOVE

A key aspect of trading Breakouts is that the Candlestick Signal must be strong. This signal provided here is too weak to justify entry and could lead to an unexpected reversal or a very erratic move to that Outer Trend Line. Weak Consolidations and/or Breakout Signals are two notorious reasons that False Breakouts take place. In the chart below, we can see that the candle to the left was a much stronger one and is that type of signal that we look for when trading breakouts.

DAILY CHART- BREAKOUT CANDLES

One possibility that could unfold in these situations is that a stronger Bull Candle appears above this weaker one. In general, when this occurs with Consolidation Breakouts, the trade can be taken at that 2nd candle. However, in this particular situation, the gap with the Outer Trend Line would become smaller, reducing the profitability of the trade even further.  Also, in some cases, the market may actually come close to the Outer Trend Line without actually hitting it. It can then either U-Turn to resume the previous trend or consolidate for a long time. 

If a move does take place it could still be a very good trade for Day Traders, but perhaps too small for Swing Traders.

Let´s see what unfolds in the days ahead.

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