JasperForex
Short

EURUSD: Symmetrical Triangle with RSI Divergence

FX:EURUSD   Euro Fx/U.S. Dollar
There is plenty of news coming out today on the             , with several pmi´s and updates on the Greek debt negotiations hitting the wires. Greece no doubt will have the biggest impact here and a resolution should be imminent. I must say I am somewhat surprised to see this pair has held up the way it did. Zooming out a bit, we can see that since the beginning of February, this pair is trading in a narrowing range in the shape of a symmetrical triangle on the 4H timeframe, vacillating up and down and converging towards a single point (the apex).

This printing of lower highs and higher lows is commonly associated with a directionless market where neither the bulls nor the bears are in control. The Greece situation and the diverging economies as well as diverging monetary policies by the FED and ECB keep me overall bearish on this pair, but I have to accept that there has been no clear direction on the 4H timeframe for several weeks.

Breakouts could generally happen 3/4 of the way towards the apex, which means it could be due. The regular bearish RSI divergence indicates underlying weakness and possible trend change towards downtrend. I am therefore watching for a breakout to the downside. For me to enter short, the following steps need to occur: (1) price breaks below and closes below the lower trend line, (2) price retraces back up, to test this trend line and (3) price stalls, stops and reverses.

In terms of trade management, I would make TP1 equal to my double my traderisk (with SL above the lower trendline and the horizontal resistance at 1.1360), and TP2 would be the support at 1.1150. As soon as TP1 would be hit, I would move the SL manually to break even enjoying a risk free trade hunting for TP2. If TP2 would be hit, we would have a double bottom pattern, but that would be for another trade setup.

There are 188 pips to be made (if this pair follows all the steps in the script) and the trade has a reward – risk ratio of 5.7!

UPDATE: Today´s breakout proved to be a fakeout. I will continue to observe this triangle for potential new breakouts.

UPDATE 2: I entered the trade after a new breakout of the price pattern occurred, followed by a retest of the lower trend line and a reversal. Yesterday TP1 was missed by 9 pips. But the weakening of the USD continued this morning and after a sudden spike the price came back in the triangle and the trade was invalidated. That’s why we have a SL in place, to minimize the loss.

POSTSCRIPT: Those who follow the chat room know that I revenge traded this one, now with the SL above the triangle. I took it off last night after a 151-pip move. All's well that ends well!
You don´t need to be a weatherman to know which way the wind blows - B. Dylan
reedake
2 years ago
Haha, I think it began just as you posted this! =)
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JasperForex MOD reedake
2 years ago
Yes, as I was editing the description and checking the numbers and details, price attempted the breakout I was referring to. Lets see if this pair will keep following the script.
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reedake JasperForex
2 years ago
Fingers crossed! So the script requires 3 separate bars on the 4 hour chart right? 1) Break out, 2) retrace, 3) reverse and drop lower
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JasperForex MOD reedake
2 years ago
Correct, as per the description. This is a conservative entry technique. Mind you, some traders may already be short, they would be more aggressive traders.
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reedake JasperForex
2 years ago
Yeah, which is probably why the price dropped so fast when it broke. They might be regretting that (for now at least) because it looks like it might retrace the entire way back inside the wedge!
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reedake JasperForex
2 years ago
So on my 4H chart, the previous bar closed outside the wedge and the current bar has a wick retracing right up to the wedge and has since moved down lower. Good call on that one!

Have you gone short already or are you waiting for another bar or two?
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JasperForex MOD reedake
2 years ago
I am at least waiting for the current candle to close before making a decision. I now see a doji just below the lower trendline.
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UPDATE: Today´s breakout proved to be a fakeout. I will continue to observe this triangle for potential new breakouts.
+1 Reply
IvanLabrie TOP JasperForex
2 years ago
Do you consider fundamentals in your analysis?
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JasperForex MOD IvanLabrie
2 years ago
Yes. I am overall bearish on this pair for fundamental reasons (as explained in the description), but given that bias I only consider potential set ups based on technical analysis (like price patterns) with a sound reward risk ratio.
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IvanLabrie TOP JasperForex
2 years ago
Sorry, was in the middle of something and had a momentary lapse!
How do you think the Eurogroup's meeting outcome will affect the Euro?
I want to short it as well, but I'm on the fence for the time being.
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JasperForex MOD IvanLabrie
2 years ago
I need to study it more in detail this weekend, but my initial thought is that not much has changed. Greece has to present measures on Monday, based on the current arrangements (which they despise), showing how they are going to "honour their financial obligations to all of their creditors fully and timely". If those measures are not agreed upon by the eurogroup, it can still blow up. Todays statement therefore does not change my bearish view on this pair. I am anticipating more volatility next week as the debt discussions will simply continue, impacting the markets.
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IvanLabrie TOP JasperForex
2 years ago
Indeed, should be great, (or very dangerous) for traders.
Have a nice weekend ;)
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JasperForex MOD IvanLabrie
2 years ago
As long as the charts move, there will be opportunities to make pips. Enjoy your weekend. And thank you for responding to this trade idea.
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1BD
2 years ago
Do u think it is time to go short for TP1?
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JasperForex MOD 1BD
2 years ago
I went short yesterday after the retest of the lower trendline. Am still in the trade.
snapshot
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1BD JasperForex
2 years ago
I AM TOO STILL ON A TRADE. DO YOU THINK THE PRICE WILL HIT TP2 TODAY ?
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JasperForex MOD 1BD
2 years ago
With both Yellen and Draghi testifying today, anything is possible, although I expect both events to be relatively tame. I don’t think TP2 will be hit today but I am hoping for TP1, which was missed yesterday by 9 pips. I am in the trade because it made sense to enter after a clear break out of the price pattern and retest of the lower trend line followed by a reversal. And once entered, I always stay in a trade until either SL or TP is hit. No guarantees here, it’s all just a probability game.
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UPDATE 2: I entered the trade after a new breakout of the price pattern occurred, followed by a retest of the lower trend line and a reversal. Yesterday TP1 was missed by 9 pips. But the weakening of the USD continued this morning and after a sudden spike the price came back in the triangle and the trade was invalidated. That’s why we have a SL in place, to minimize the loss.
Reply
POSTSCRIPT: Those who follow the chat room know that I revenge traded this one, now with the SL above the triangle. I took it off last night after a 151-pip move. All's well that ends well!
snapshot
+1 Reply
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