Eventhough Friday closed down on wide spread it is a quite bullish signal. Why: because all of that wide spread was backed by low volume which in Wyckoff law of effort and result is little effort resulted in strong downmove which is an anomaly, some would call it false breakout.
To back out theory of false breakout we have low volume weekly downward movement, if market is weak volumes should rise when prices are going down. Also there is a nice shakeout with is followed by narrow spread low volume candle this is transleted differently some people call it no supply, test or no selling pressure which all pretty much mean the same. So to make it short the narrow spread candle confirms weakness.
Agressive traders could go long at the break of shakeout candle, since the volume isn't very high it is possible that the shakeout will not be tested anymore. But when looking at the 20 period EMA I would wait out for a test to shakeout area because after that price will probably be near or above the EMA.
Conservative traders entry is explained on the chart.
Also something to note that pound positions have climbed from -83K to -59K which makes a possibility that we might not see a breakout this week or at least not in the beginning. It's not a fact that breakout won't happen but just a thing to consider. Personally I would belive in the end of the week will the breakout happen since we have some room to the breaking of the downward trendline, so another thing to expect is some mopping out proccess in the accumulation phase in other words the shakeout are will probably be shaken out again
To back out theory of false breakout we have low volume weekly downward movement, if market is weak volumes should rise when prices are going down. Also there is a nice shakeout with is followed by narrow spread low volume candle this is transleted differently some people call it no supply, test or no selling pressure which all pretty much mean the same. So to make it short the narrow spread candle confirms weakness.
Agressive traders could go long at the break of shakeout candle, since the volume isn't very high it is possible that the shakeout will not be tested anymore. But when looking at the 20 period EMA I would wait out for a test to shakeout area because after that price will probably be near or above the EMA.
Conservative traders entry is explained on the chart.
Also something to note that pound positions have climbed from -83K to -59K which makes a possibility that we might not see a breakout this week or at least not in the beginning. It's not a fact that breakout won't happen but just a thing to consider. Personally I would belive in the end of the week will the breakout happen since we have some room to the breaking of the downward trendline, so another thing to expect is some mopping out proccess in the accumulation phase in other words the shakeout are will probably be shaken out again