1.2630, and then possibly 1.2830 after that.
Let’s have a look at some charts.
I have marked the 1.2630 – 1.2650 zone on the chart above and shown several of the significant reversals that have happened on that zone in the past. Nothing I am seeing in the recent price action suggests a major reversal on the cards until at least 1.2630 – let’s unpack that a little bit.
Switching to a candlestick chart gives us some additional insight, namely:
- We see long-term support in play since early 2017 coming into focus.
- The market structure suggests that the bulls remain in control. We see big, expansive bullish moves, followed by a consolidation or retrace periods that don’t go anywhere.
- The current consolidation structure we see looks like a triangle to me.
One must be careful not to include this weeks’ price movements in our analysis and assume that the triangle has broken to the upside. Closing prices matter, and we are nowhere near the close.
The weekly triangle consolidation looks more like a channel down on the daily timeframe. Both paint the same picture – price is pausing before carrying.
The current daily picture is doubly interesting – price is about to make its fourth (or fifth, depending on what you decide to count) stab at breaking higher. Contrast that with the last move lower – price was unable to make its third touch on the lower trendline.
That tells you something: The buyers stepped in early, perhaps concerned that the upside break is imminent and not wanting to miss out.
Price seems set on testing the upper channel trendline. So let it. One of two things will happen – price will either attract sellers, and make another run lower, or consolidate up there and bust out higher.
Either would be tradable, but I prefer to go with the prevailing trend; I prefer the long.
Either look for the bounce off the upper channel trendline or wait for the recent highs to be cleared and retested. Both should provide a favourable reward to risk, and a position aligned with the longer- and medium-term trend.