The Australian dollar rose strongly after a report showed the nation’s underlying inflation accelerated. This moved the price of this pair above the B point of a potential bearish bat on the 30M (where its helped further by a daily support level) so this set up qualifies as a trade candidate and it goes on my watch list. Price has travelled only about 40% on the way from C to D, so patience is key and I am not jumping the gun. Also, be aware we will have the FOMC statement coming out today in about 11 hours, which will impact USD strength.
When defining the potential reversal zone (PRZ) for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: a BC expansion (in this case 2618 BC). This defines a very tight zone, about 10 pips wide, represented by the orange lines in the chart. There is also some structure near this zone, which increases the edge of a reversal. Should price action test the PRZ and reverse convincingly, I would enter short. SL goes 10 pips behind the next resistance level. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD.
There are 155 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 4.0!
UPDATE: This pattern never completed, so I did not enter any trade here.
When defining the potential reversal zone (PRZ) for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: a BC expansion (in this case 2618 BC). This defines a very tight zone, about 10 pips wide, represented by the orange lines in the chart. There is also some structure near this zone, which increases the edge of a reversal. Should price action test the PRZ and reverse convincingly, I would enter short. SL goes 10 pips behind the next resistance level. TP1 = 382 retracement of AD and TP2 = 618 retracement of AD.
There are 155 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 4.0!
UPDATE: This pattern never completed, so I did not enter any trade here.
You don´t need to be a weatherman to know which way the wind blows - B. Dylan