Nice rounding top reversal, potential 4H short for CADCHF
Right now, I'm looking at a nice rounding top reversal that is in the works on the 4H charts of CADCHF. The pair has been in a steady uptrend for quite a while now and while the initial push up was very strong, the uptrend has been losing steam recently. We can see a nice flattening curve in the price action, culminating in a sharp sell-off with a very strong bearish bar at the top. That sell-off happened exactly at an area of resistance created by a previous swing high, which adds to the confluence of this setup. This move set the stage for the setup as it currently is.
Since then, we see behaviour that is typical for bearish reversals: smaller bullish candles followed by a very strong bearish candle slamming down, often engulfing many of the previous bull candles. This is a signal that while the bulls are still trying to push the price up, their attempts are lacking momentum and every time, the reaction from the bears is much stronger and pronounced. Currently, the price is struggling to break through the local support zone around the 0.73350 price level.
Other than that, it's very clear that we have RSI divergence on the way up and that the price is in the oversold regions (Fibonacci extension well over 200.0%). The last attempt to push the price up earlier today resulted in a pin bar and a 20 SMA rejection, which is further indication that the price might be close to breaking the local support and start a move further down.
So this is what I'm waiting for: a strong break (and close!) below the 0.73350 level. I might actually prefer to see a small retracement before that break, as it often is a sign that the following move will have some legs as it shows that the bulls are really exhausted by then. But we can only wait, the price might just as well break the level immediately.
News-wise, we have Canadian retail sales data tomorrow and Canadian CPI release on Friday. Something to be aware of.
This and other setups are described on my website, where you can find my weekly forex outlook.
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Since then, we see behaviour that is typical for bearish reversals: smaller bullish candles followed by a very strong bearish candle slamming down, often engulfing many of the previous bull candles. This is a signal that while the bulls are still trying to push the price up, their attempts are lacking momentum and every time, the reaction from the bears is much stronger and pronounced. Currently, the price is struggling to break through the local support zone around the 0.73350 price level.
Other than that, it's very clear that we have RSI divergence on the way up and that the price is in the oversold regions (Fibonacci extension well over 200.0%). The last attempt to push the price up earlier today resulted in a pin bar and a 20 SMA rejection, which is further indication that the price might be close to breaking the local support and start a move further down.
So this is what I'm waiting for: a strong break (and close!) below the 0.73350 level. I might actually prefer to see a small retracement before that break, as it often is a sign that the following move will have some legs as it shows that the bulls are really exhausted by then. But we can only wait, the price might just as well break the level immediately.
News-wise, we have Canadian retail sales data tomorrow and Canadian CPI release on Friday. Something to be aware of.
This and other setups are described on my website, where you can find my weekly forex outlook.
Find more analysis on smartforexlearning.com and give us a follow:
- on Twitter: twitter.com/smartfxlearning
- on Facebook: www.facebook.com/smartforexlearning
- on Google+: plus.google.com/+Smartforexlearning
Trade closed manually:
Unfortunately, after a good run down, better than expected Canadian retail sales numbers pushed the price back up.