GBP/USD 1 Hour Double Bottom Pattern?
We have a Double Bottom formed on the 1-hour chart for GBP/USD.
List of Confluences that need to be present for a high probability setup
1) We look at the bottom peaks of the double bottom pattern and ideally would like to see the second peak reach just a little lower than the first. This gives us a decent reason to look for divergence. Do we see this here? YES!
2) We need to see that we have Full Divergence across the MacD – This means that we need Divergence across the Histogram and Divergence across the MA Lines. This shows us that sellers are weakening and that buyers will start to take control at some point. Notice the arrows in the chart illustrating this. Do we see this here? YES!
3) We need to see high volume on the break out of the Neck Zone. Do we see this here? YES!
4) We need to see that the trend is coming to an end and that the peak of the W in the double bottom pattern takes out previous resistance and breaks through the trendline. I have drawn what a breakthrough of the trendline should have looked like. Do we see this here? NO!
So, we have four confluences that need to be present. On this pattern, we only have three. Thus, I would not consider this a high probability setup. Nor would I enter this.
Trading is a game of probabilities. By backtesting this setup, I have concluded that I need to see the four above confluences before I think about opening a position.
However, for the sake of this chart, I have presented where my entry would be and where I would place my two targets. I use the fib extension to find my targets. This will be explained properly in another post.
We need to see the price break above the neck zone and retrace back into it for an entry.
We would enter on the retrace of the neck zone.
List of Confluences that need to be present for a high probability setup
1) We look at the bottom peaks of the double bottom pattern and ideally would like to see the second peak reach just a little lower than the first. This gives us a decent reason to look for divergence. Do we see this here? YES!
2) We need to see that we have Full Divergence across the MacD – This means that we need Divergence across the Histogram and Divergence across the MA Lines. This shows us that sellers are weakening and that buyers will start to take control at some point. Notice the arrows in the chart illustrating this. Do we see this here? YES!
3) We need to see high volume on the break out of the Neck Zone. Do we see this here? YES!
4) We need to see that the trend is coming to an end and that the peak of the W in the double bottom pattern takes out previous resistance and breaks through the trendline. I have drawn what a breakthrough of the trendline should have looked like. Do we see this here? NO!
So, we have four confluences that need to be present. On this pattern, we only have three. Thus, I would not consider this a high probability setup. Nor would I enter this.
Trading is a game of probabilities. By backtesting this setup, I have concluded that I need to see the four above confluences before I think about opening a position.
However, for the sake of this chart, I have presented where my entry would be and where I would place my two targets. I use the fib extension to find my targets. This will be explained properly in another post.
We need to see the price break above the neck zone and retrace back into it for an entry.
We would enter on the retrace of the neck zone.