AUSSIE DOLLAR POTENTIAL FALL TO 64 CENTS - A CASE STUDY...
Attached is the 4 hour chart of the AUDUSD. I have identified a wyckoff distribution pattern indicating a minimum long term target of 0.6400
We also have had a smaller distribution pattern within the larger pattern play out. We had a downside target of 0.6860 come within a few pips of being hit and was a great trade to the short side.
After the large shakeout to start the year, the Aussie dollar rallied higher sharply. We saw a peak in the middle of January, a pullback and then surged higher late January. We see a spike in late January at the highs just below 73c. This appears to be a buying climax (BC) in the market. We then see a sharp decline and automatic reaction (AR) lower to the 0.7050 level. This forms the parameters of our trading range. Price rallies again to attempt to test (ST) the January highs and we fail. Early March the lows are taken out and we see a sign of weakness (SOW). We are now forming lower high and lower lows. Price starts to form a trading range and building cause for a bigger move. Price tries to move higher over the next month, but once again stalls at the 72c level. There is simply no demand to go higher. This is the last point of supply (LPSY).
If we look closer at the period between mid March and mid April, a smaller distribution pattern forms. We see the large volume come in on the 21st March, and looks to be a buying climax in the market once again. The same wyckoff patterns form with a buying climax, automatic rally, secondary test, sign of weakness. However this time we see price upthrust the buying climax, fail and react strongly lower. Notice the nice wide bar and volume as price falls through the "AR" level.
If you look at some of my other posts, I explain the different phases of the wyckoff patterns.
Both patterns are confirmed when price attempts to rally back to the AR level (Back up to the creek level) and fails. The start of May sees the start of the decline and mark down.
If we take a count of the point and figure projection of the smaller distribution pattern, we get a count lower of 0.6860. Price came within a few pips of that target. A short trade lower after the upthrust and failure of the 72c level would have been excellent with a target down near the 0.6860 level with a trailing stop.
If we take a count of the point and figure projection of the larger distribution pattern, we get a count lower of 0.6400. As wyckoff said, the bigger the cause (price consolidating sideways), the bigger the effect (mark up/down).
Just visually you can see that the smaller pattern had the power to move the price the distance it did, the bigger pattern has the power for a much larger move.
I will post the point and figure charts as well.
I believe we will consolidate here in a range before falling lower. We may even see a rally up towards the 70c level and see a buying climax and the pattern may form again.
Until proven otherwise the bias is lower and looking for weakness higher for short entries.
Please do your own research before making any decisions. These are my thoughts and are designed for educational purposes only and not for trading advice.
We also have had a smaller distribution pattern within the larger pattern play out. We had a downside target of 0.6860 come within a few pips of being hit and was a great trade to the short side.
After the large shakeout to start the year, the Aussie dollar rallied higher sharply. We saw a peak in the middle of January, a pullback and then surged higher late January. We see a spike in late January at the highs just below 73c. This appears to be a buying climax (BC) in the market. We then see a sharp decline and automatic reaction (AR) lower to the 0.7050 level. This forms the parameters of our trading range. Price rallies again to attempt to test (ST) the January highs and we fail. Early March the lows are taken out and we see a sign of weakness (SOW). We are now forming lower high and lower lows. Price starts to form a trading range and building cause for a bigger move. Price tries to move higher over the next month, but once again stalls at the 72c level. There is simply no demand to go higher. This is the last point of supply (LPSY).
If we look closer at the period between mid March and mid April, a smaller distribution pattern forms. We see the large volume come in on the 21st March, and looks to be a buying climax in the market once again. The same wyckoff patterns form with a buying climax, automatic rally, secondary test, sign of weakness. However this time we see price upthrust the buying climax, fail and react strongly lower. Notice the nice wide bar and volume as price falls through the "AR" level.
If you look at some of my other posts, I explain the different phases of the wyckoff patterns.
Both patterns are confirmed when price attempts to rally back to the AR level (Back up to the creek level) and fails. The start of May sees the start of the decline and mark down.
If we take a count of the point and figure projection of the smaller distribution pattern, we get a count lower of 0.6860. Price came within a few pips of that target. A short trade lower after the upthrust and failure of the 72c level would have been excellent with a target down near the 0.6860 level with a trailing stop.
If we take a count of the point and figure projection of the larger distribution pattern, we get a count lower of 0.6400. As wyckoff said, the bigger the cause (price consolidating sideways), the bigger the effect (mark up/down).
Just visually you can see that the smaller pattern had the power to move the price the distance it did, the bigger pattern has the power for a much larger move.
I will post the point and figure charts as well.
I believe we will consolidate here in a range before falling lower. We may even see a rally up towards the 70c level and see a buying climax and the pattern may form again.
Until proven otherwise the bias is lower and looking for weakness higher for short entries.
Please do your own research before making any decisions. These are my thoughts and are designed for educational purposes only and not for trading advice.