GBPUSD - Break in Trend Direction - Ascending Triangle Pattern

FX:GBPUSD   British Pound / U.S. Dollar
Hi Traders!
The market is in a Uptrend.

Let's start our Multiple Timeframe Analysis with the weekly Timeframe (TF).
Then we'll continue with the daily, H4 and H1 Timeframes.

Here's the weekly:

As you can see we firstly had a descending Trendline.
If you scroll back, you'll find out, that the starting point of this Trendline is on Auguste 2015.
After 5 years the market broke out of this Trendline.
Since then it is moving in an Uptrend.
At this moment, we're getting support by the Trendline.
The next target is the next Resistance at 1.37900.

Continuing with the daily:

In the centre you can determine a broadening Wedge .
This is the type of Wedge , where the two Trendlines diverge (go further away).
The blue dotted line shows the recent High which was at the beginning of September.
If you would scroll to the left, you would recognize, that the price made another High there too in the past.

Let's take a look to the H4-TF:

Here you can see an ascending Triangle Pattern.
Even though it is expanded, the conditions for a Triangle Pattern are satisfied:
  • Respected Support or Resistance Level (blue dotted line)
  • Higher Highs / Lower Lows into the blue dotted line
Ok, now we know the overall structure.
But how do we enter now?
Let's find it out on the H1-Timeframe.

Here is the hourly TF:

In the Forex Market, very often a
- Consolidation or
- Retracement Move
follows after a Trending Move.

So, imagine these two situations.

Situation 1:
We have a strong Resistance above us.
Market makes three full filled green bars into Resistance.

Situation 2:
We have a strong Resistance above us.
Market comes into Resistance, but it is slowing down.
It still makes higher Lows, only no more higher Highs.
Event though the market is at the strong Resistance, price doesn't push lower.

When will the price Break out of the Resistance and when will it turn back?

If you chose Situation 2 for the Breakout, then you are absolutely right!
Ask you this question: Why isn't the price pushing lower, even though it is at this strong Resistance?
That automatically means, that price accepts this "high" price.
It is ready to pay higher prices for this market.

In addition, it really has fuel to Break out in this situation!
  • If you sell at this Level, your SL (= Buy Stop Order) would be above the Resistance.
    In case of a Breakout your SL would be hit, so you would practically buy too.
  • Breakout Traders use this to put there Buy Stop Order right above this Resistance.
    They have an better place to put there SL because of this tiny higher Lows.

Situation 1 is going to reverse, because for example Traders who consider Indicators like the RSI ,
they would notice an overbought market. So that's why they'll sell.
Then Support and Resistance Traders use this Level to trade the Reversal itself.
Lastly, in case of a Breakout, False Break Traders look out for a Sell for this Fakeout too.

We here clearly have Situation 2 and that's why we expect a Breakout.
Target is at the Area at the Daily Trendline and Weekly Resistance.

We recommend to trade the Breakout with a Retest to avoid Fake-outs.

Thanks and successful Trading :)!


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