our recent articles have addressed how traders can analyse and trade price patterns in general and breakouts in specific. This information is now especially useful because this week’s Forex market is offering multiple flag chart patterns.
Two of the most interesting patterns can be found on the GBP/USD and USD/CAD. Today’s article discusses possible trade setups and targets.
The Cable is showing no signs of trend weakening as yet. In fact, the available information indicates bullish momentum:
Furthermore, when we add the Fibonacci sequence tool to the most recent 1 hour bottom, it becomes clear that price has already broken above the 5th level. This means that the next potential target is the 6th Wizz level all the way at 1.3750.
There are two methods for trading the continuation pattern: breakout and bounce. The bounce could occur at the Fibonacci levels at around the 38.2-50% zone. There is also the potential round level of 1.35 that could act as support. I am keeping an eye out for a bullish bounce at around 1.35-1.3525.
The other scenario is a breakout above the bullflag chart pattern. My favourite method for trading breakout is by waiting for good strong and sizeable candlesticks with a close near the high (with bullish breaks). The other technique is to wait for a new chart pattern on a lower time frame before trading the breakout, also called trading the break after the pattern break. (Last but not least, the ecs.SWAT method makes trading trend continuations much easier by offering clear entry signals.)
The USD/CAD is offering a similar scenario as the GBP/USD: strong momentum and no divergence in sight. A continuation of the bearish USD/CAD also seems to be an interesting trade setup for the upcoming trading week.
The main target for the USD/CAD is the -27.2% Fibonacci target of a daily-weekly Fib, which is at 1.1850. The 1.20 round level could cause some headache for the bears but a bearish break would indicate a continuation towards 1.1850.
The entry method is again twofold: bounce or break. The USD/CAD already bounced at the 50% Fibonacci level so the next major resistance Fib level is the 61.8% at 1.2275. The alternative method is to wait for a break of the bearflag chart pattern. There are multiple entry options when tackling pattern breaks:
These 2 pairs seems to have the most potential for trading during the upcoming week. But check out our analysis on other currency pairs too in the video below.
Until next time and many green pips,
My twitter: @ChrisSvorcik
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