2618 Second Chance on EUR/USD: Triple play potential.
I'm looking at a 2618 trade-setup on the 60 minute for a second chance at entering Short EUR/USD.
At the end of last week, this pair closed forming a double top (yellow triangle). As we came into the beginning of this week (today obviously), price action has confirmed the double top shorting opportunity and retraced nicely into 161.8% extension of the right leg and low of the double top and has begun a bullish retracement subsequent to the extension down.
This should provide a second chance at a Shorting opportunity if price retraces at least 61.8%.
I tend to look for entry halfway between the 61.8 and 76.4% retracement as in my back-testing, price has shown a tendency on occasion to retrace higher.
I'll be looking to place Stops above the high of the right leg of the DT.
As for targets, price action is in the process of forming a Bullish Cypher (I'll post a separate analysis on this later). I'll, in anticipation of this harmonic pattern completing, be using the completion level as my target for the Short.
Overall, I have a short term/limited bullish view on this pair to about the 1.1775 level which would potentially be the completion point of a 4H potential Bearish Cypher (post that idea later as we get closer to completion). As such, I anticipate the completion of the 1H potential Bullish Cypher to act as the catalyst for the predicted bullish momentum.
The bullish bias is limited not only because of the anticipated Bearish Cypher, but mainly following from the spot on analysis posted on this pair by Akil Stokes (see link below-Thank you Chef). Price action has broken the neckline of the Daily Chart Head and Shoulders and has since found support at about the 1.1612 level. As such I anticipate some upward corrective movement/relief, before further downside is achieved.
At the end of last week, this pair closed forming a double top (yellow triangle). As we came into the beginning of this week (today obviously), price action has confirmed the double top shorting opportunity and retraced nicely into 161.8% extension of the right leg and low of the double top and has begun a bullish retracement subsequent to the extension down.
This should provide a second chance at a Shorting opportunity if price retraces at least 61.8%.
I tend to look for entry halfway between the 61.8 and 76.4% retracement as in my back-testing, price has shown a tendency on occasion to retrace higher.
I'll be looking to place Stops above the high of the right leg of the DT.
As for targets, price action is in the process of forming a Bullish Cypher (I'll post a separate analysis on this later). I'll, in anticipation of this harmonic pattern completing, be using the completion level as my target for the Short.
Overall, I have a short term/limited bullish view on this pair to about the 1.1775 level which would potentially be the completion point of a 4H potential Bearish Cypher (post that idea later as we get closer to completion). As such, I anticipate the completion of the 1H potential Bullish Cypher to act as the catalyst for the predicted bullish momentum.
The bullish bias is limited not only because of the anticipated Bearish Cypher, but mainly following from the spot on analysis posted on this pair by Akil Stokes (see link below-Thank you Chef). Price action has broken the neckline of the Daily Chart Head and Shoulders and has since found support at about the 1.1612 level. As such I anticipate some upward corrective movement/relief, before further downside is achieved.
Trade active:
Position opened (demo).
Trade closed: stop reached:
Trade closed and unfortunately our stop lose was hit :(. Not unexpectedly as I had factored the possibility into my analysis.
As you can see, our stop was placed well above an area of significant resistance which held multiple times (red arrows). It was anticipated that price action would take a small pause in this area, giving credence in the anticipated completion of the Bullish Cypher. However price action was highly determined to breach this area of resistance and did so successfully (green arrow) during the course of the after hours market. (NOTE: I've seen this happen a lot with harmonic patterns - pattern identified early but price action does not continue to the D leg. There is a very good and now well learnt reason why we wait for patterns to complete at the D leg before entry-This trade wasn't entered on the basis of the harmonic Cypher but rather, identification of the pattern was a complement to the initial basis for the trade so - Discipline: Check).
The extent of the move higher provides confidence that this was not a stop hunting escapade and as such, despite the lose I am concluding that this was not a bad trade. We were simply on the wrong side of market sentiment. Did my analysis, followed my rules of engagement, stops were adequately placed, the market just had other ideas. So I'm counting this one a good trade with an unfortunately result.
There is one point I want to take into consideration going forward. After the position was opened, there was a strong push higher in price action (about 13:00 pm on the chart) which had no fundamental basis other than the negative news surrounding U.Ks Prime Minister May's cabinets vote of no confidence/Brexit which came out much earlier in the day and at this juncture (the time and basis for entry), wasn't expected to unduly influence this pair. The point is the strong push higher may have been an indication of change in sentiment and as such could have been taken as a basis to review our expectations of market sentiment. Woulda, Coulda, Shoulda. I'll be looking to back-test this in some way that will not unnecessarily (paralysis by analysis is a trading virus) skew/distort my trading plan and strategies, to see if it can provide a means of identifying changes in market sentiment and help in mitigating/cutting loses early (e.g bearish/bullish expectation through IPDE analysis, but next candle/price action moves STRONGLY in the opposite direction).
Nonetheless, like as I mentioned earlier, this was not entirely unexpected. Market has continued it's relief rally, invalidating the identified Bullish Cypher, but now providing more validity (though we can not conclude until we get an actual completion) to the potential of our identified Bearish Cypher (I will start looking to post the analysis on this).
OPPORTUNITY STILL REMAINS. BACK TO THE DRAWING BOARD.
Trade closed and unfortunately our stop lose was hit :(. Not unexpectedly as I had factored the possibility into my analysis.
As you can see, our stop was placed well above an area of significant resistance which held multiple times (red arrows). It was anticipated that price action would take a small pause in this area, giving credence in the anticipated completion of the Bullish Cypher. However price action was highly determined to breach this area of resistance and did so successfully (green arrow) during the course of the after hours market. (NOTE: I've seen this happen a lot with harmonic patterns - pattern identified early but price action does not continue to the D leg. There is a very good and now well learnt reason why we wait for patterns to complete at the D leg before entry-This trade wasn't entered on the basis of the harmonic Cypher but rather, identification of the pattern was a complement to the initial basis for the trade so - Discipline: Check).
The extent of the move higher provides confidence that this was not a stop hunting escapade and as such, despite the lose I am concluding that this was not a bad trade. We were simply on the wrong side of market sentiment. Did my analysis, followed my rules of engagement, stops were adequately placed, the market just had other ideas. So I'm counting this one a good trade with an unfortunately result.
There is one point I want to take into consideration going forward. After the position was opened, there was a strong push higher in price action (about 13:00 pm on the chart) which had no fundamental basis other than the negative news surrounding U.Ks Prime Minister May's cabinets vote of no confidence/Brexit which came out much earlier in the day and at this juncture (the time and basis for entry), wasn't expected to unduly influence this pair. The point is the strong push higher may have been an indication of change in sentiment and as such could have been taken as a basis to review our expectations of market sentiment. Woulda, Coulda, Shoulda. I'll be looking to back-test this in some way that will not unnecessarily (paralysis by analysis is a trading virus) skew/distort my trading plan and strategies, to see if it can provide a means of identifying changes in market sentiment and help in mitigating/cutting loses early (e.g bearish/bullish expectation through IPDE analysis, but next candle/price action moves STRONGLY in the opposite direction).
Nonetheless, like as I mentioned earlier, this was not entirely unexpected. Market has continued it's relief rally, invalidating the identified Bullish Cypher, but now providing more validity (though we can not conclude until we get an actual completion) to the potential of our identified Bearish Cypher (I will start looking to post the analysis on this).
OPPORTUNITY STILL REMAINS. BACK TO THE DRAWING BOARD.
The purple line is a 4H level of resistance which also happens to be the neckline of the identified Daily H&S (see link to Akil Stokes analysis on the H&S below) which when taken with price action analysis further emphasises the strength and validity of this level as a significant area of resistance.