We now have a new price pattern in development that might lead to a concrete trade setup. A potential ( ) is forming on the 30M timeframe and PA already travelled 60% from the top of the right shoulder towards the neckline. The market tried three times to go higher and failed, so chances are it will now head lower. There are several ways to trade an pattern, from more aggressive to more conservative. I enter trades conservatively, with additional confirmation, so before I would enter the trade, the following steps would have to play out first: (1) completion of this reversal pattern (2) break of the neckline to the downside, (3) retracement back into the neckline and (4) a clear sign of reversal upon testing the neckline (which should then be resistance).
If these four steps play out as described I would enter a short. SL would go 10 pips behind the neckline. TP1 = at about 50% towards TP2 and TP2 is derived by extending the distance between head – neckline in the direction of the breakout. I should mention the additional risk that Monday is a US bank holiday, reducing the of transactions.
There are 72 pips to be made (if this pair follows the script) and the trade has an excellent reward – risk ratio of 7.1!
UPDATE: Price never completed the pattern or broke the neckline, so there was no entry signal for this trade. No problem, nothing was risked and nothing was lost. On to the next trade!