Price had recently broken through resistance, and we saw a strong bullish break out move.
As the bullish momentum slowed down, we saw bears come back into power and drove the price back down to resistance. At this pint, we need to look for 2 actions:
- Either price will break through the resistance level and the bearish move will continue, most likely down to previous support levels in which you could enter a short trade when the break through is confirmed. OR - We will see a rejection at the trend line where the price is struggling to break through the resistance, and bulls come back into the equation to drive the price upward. This is when you can enter a long trade.
After identifying the rejection at the trend line, also in line with the MACD and RVI, I entered a long trade and banked a nice profit before bears came back into power and drove the price down.
Support and resistance levels can be used to identify some lovely trade setups, as we have seen with AUD/NZD.