When the pair finally broke below and closed below the lower channel last Friday, it subsequently retraced back into this broken support and tested it twice where it acted nicely as resistance. The odds are that this was not a fake out and that price will continue to move in the direction of the breakout, since at this level, after the original break out, there still is more selling than buying interest. This was confirmed by the fact that in between both tests of resistance, this pair moved passed the low of the breakout candle. We now have a potential break out play here and I put this trade candidate on my watch list. Provided the “weekend gap” does not disturb this picture, I will be looking to sell this pair at this level after the Asian open.
SL goes inside the channel, 30 pips above the tested resistance. TP1 = trade risk, TP2 = price calculated by taking the height of the channel and extending it in the direction of the breakout. In terms of trade management, when TP1 is hit I would take profit on 1 position and roll my stop loss to breakeven, enjoying a risk free trade hunting for TP2.
There are 195 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 4.0!