EUR/GBP - 5,5 years RECTANGLE + HEAD & SHOULDERS CONTINUATION
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Since 2014, my markets approach is to spot trading
opportunities based solely on the development of
CLASSICAL CHART PATTERNS
🤝Let’s learn and grow together 🤝
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Hello Traders ✌
It's time to look at the bigger picture of two currency crosses leaders: EUR/GBP and EUR/USD (next post).
As you can see on the monthly and weekly charts (left side), price action during the last five and a half years took the form of a massive Rectangle with very strong (tested several times) and well defined (quite precise price levels) boundary lines.
We can also see that this cross is quite reliable in terms of classical chart patterns (each colored line you can spot was a pattern which worked out pretty nicely).
That said, you know that for me proportion between the pattern and the previous trend are very important and so I would have greatly preferred this to be a Continuation pattern and so to see a breakout on the upper side of this Rectangle.
As a reversal instead, there is nothing to reverse here in my opinion. Moreover, a five and a half years long pattern defines more a characteristic of this cross during that period rather than a continuation/reversal pattern as we commonly intend in Classical Technical Analysis.
That said, the pattern itself is amazing and could lead to a significant down move.
Such a huge pattern normally makes very difficult to say at which price level we can label a breakout as "valid" but, in this case, we got a small help since we have what is called a "launching pattern". A launching pattern is a small pattern that occurs inside the pattern and usually at its last stages or just before the possible breakout as in this case.
On the daily chart (right side), we can see a small 45 days Head & Shoulder Continuation which developed exactly at the lower boundary of the Rectangle and just below the 200 days EMA.
I consider all the 0.8250/0.8300 area as support and I would not trade the H&S in itself (that’s why you don’t see any target drawn for it) but only as a useful tool to determine a safer breakout and stop loss price levels or to begin "scaling in" my position size.
If prices go towards the target, keep in mind that we will also have to deal with the 0.8100 previous level.
This could be a great opportunity but it’s also a complicated one since it’s very big so I would play it much safer than usual and so I feel more comfortable looking at this as a pure "position trade" and not as a "swing one".
Today it is too early to say something precise since this could still be an "out of line movement" to hard test the lower boundary of the Rectangle and so we could also see a quick price recover.
Be really careful in your evaluations guys!
🔎🔎🔎 ALWAYS REMEBER
"A pattern IS NOT a Pattern until the breakout is completed. Before that moment it is just a bunch of colorful candlesticks on a chart of your watchlist"
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⚠ DISCLAIMER ⚠
The content is The Art Of Charting's personal opinion and it is posted purely for educational purpose and therefore it must not be taken as a direct or indirect investing recommendations or advices. Any action taken upon these information is at your own risk.
════════════════════════════════
Since 2014, my markets approach is to spot trading
opportunities based solely on the development of
CLASSICAL CHART PATTERNS
🤝Let’s learn and grow together 🤝
═════════════════════════════════
Hello Traders ✌
It's time to look at the bigger picture of two currency crosses leaders: EUR/GBP and EUR/USD (next post).
As you can see on the monthly and weekly charts (left side), price action during the last five and a half years took the form of a massive Rectangle with very strong (tested several times) and well defined (quite precise price levels) boundary lines.
We can also see that this cross is quite reliable in terms of classical chart patterns (each colored line you can spot was a pattern which worked out pretty nicely).
That said, you know that for me proportion between the pattern and the previous trend are very important and so I would have greatly preferred this to be a Continuation pattern and so to see a breakout on the upper side of this Rectangle.
As a reversal instead, there is nothing to reverse here in my opinion. Moreover, a five and a half years long pattern defines more a characteristic of this cross during that period rather than a continuation/reversal pattern as we commonly intend in Classical Technical Analysis.
That said, the pattern itself is amazing and could lead to a significant down move.
Such a huge pattern normally makes very difficult to say at which price level we can label a breakout as "valid" but, in this case, we got a small help since we have what is called a "launching pattern". A launching pattern is a small pattern that occurs inside the pattern and usually at its last stages or just before the possible breakout as in this case.
On the daily chart (right side), we can see a small 45 days Head & Shoulder Continuation which developed exactly at the lower boundary of the Rectangle and just below the 200 days EMA.
I consider all the 0.8250/0.8300 area as support and I would not trade the H&S in itself (that’s why you don’t see any target drawn for it) but only as a useful tool to determine a safer breakout and stop loss price levels or to begin "scaling in" my position size.
If prices go towards the target, keep in mind that we will also have to deal with the 0.8100 previous level.
This could be a great opportunity but it’s also a complicated one since it’s very big so I would play it much safer than usual and so I feel more comfortable looking at this as a pure "position trade" and not as a "swing one".
Today it is too early to say something precise since this could still be an "out of line movement" to hard test the lower boundary of the Rectangle and so we could also see a quick price recover.
Be really careful in your evaluations guys!
- Pattern Class: 🌕🌕🌕🌕🌕
- Target area: 0.7380
- Breakout area below: 0.8200
🔎🔎🔎 ALWAYS REMEBER
"A pattern IS NOT a Pattern until the breakout is completed. Before that moment it is just a bunch of colorful candlesticks on a chart of your watchlist"
═════════════════════════════════
⚠ DISCLAIMER ⚠
The content is The Art Of Charting's personal opinion and it is posted purely for educational purpose and therefore it must not be taken as a direct or indirect investing recommendations or advices. Any action taken upon these information is at your own risk.
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