Potential Bearish Bat Harmonic Forming on USDCAD
Looking at USDCAD on the daily, there is a potential bearish bat harmonic pattern setting up.
The B-point is retracing just under 50% of the XA leg, which qualifies this as a perfect bat pattern upon completion.
The Potential Reversal Zone is calculated as a confluence of the
1.) 88.6% XA level
2.) 1.272AB=CD
3.) 161.8% BC inversion level (see below for criteria)
- If the B-point is 50% of XA, then the BC inversion level is 161.8% of BC if the C-point stays within 74.7%-83.6% of AB.
Currently the price is hitting resistance at the top of this channel and struggling to move up.
You probably have noticed that where the price is currently struggling is right in line with the AB=CD and BC inversion levels.
Right above this is the 0.5 Fib retrace of 1.20584 to 1.46860 (dotted black fib) which will act as additional resistance.
However, please be aware of the large Potential Reversal Zone (PRZ).
The top of the PRZ is defined by the 88.6% of XA level where Point-D is currently placed, and this also forms confluence with the 0.618 fib retrace of 1.10120 to 1.61616 (solid black fib).
The price can reverse anywhere within this zone, however I find that typically in Bat patterns the price reverses closer to the AB=CD and BC inversion levels. So check this idea for updates once reversal point has been found, for updated target levels (read below).
Targets:
If and once price reverses at the PRZ, the green targets will be adjusted depending on where the price reverses.
For now, I have provided green targets based on a reversal at Point-D which are the 0.382 and the 0.618 retracements of the AD leg.
Stop Loss:
The stop loss is calculated as 113% extension of XA.
Please hit like if you found this useful. Thanks!
The B-point is retracing just under 50% of the XA leg, which qualifies this as a perfect bat pattern upon completion.
The Potential Reversal Zone is calculated as a confluence of the
1.) 88.6% XA level
2.) 1.272AB=CD
3.) 161.8% BC inversion level (see below for criteria)
- If the B-point is 50% of XA, then the BC inversion level is 161.8% of BC if the C-point stays within 74.7%-83.6% of AB.
Currently the price is hitting resistance at the top of this channel and struggling to move up.
You probably have noticed that where the price is currently struggling is right in line with the AB=CD and BC inversion levels.
Right above this is the 0.5 Fib retrace of 1.20584 to 1.46860 (dotted black fib) which will act as additional resistance.
However, please be aware of the large Potential Reversal Zone (PRZ).
The top of the PRZ is defined by the 88.6% of XA level where Point-D is currently placed, and this also forms confluence with the 0.618 fib retrace of 1.10120 to 1.61616 (solid black fib).
The price can reverse anywhere within this zone, however I find that typically in Bat patterns the price reverses closer to the AB=CD and BC inversion levels. So check this idea for updates once reversal point has been found, for updated target levels (read below).
Targets:
If and once price reverses at the PRZ, the green targets will be adjusted depending on where the price reverses.
For now, I have provided green targets based on a reversal at Point-D which are the 0.382 and the 0.618 retracements of the AD leg.
Stop Loss:
The stop loss is calculated as 113% extension of XA.
Please hit like if you found this useful. Thanks!
Comment:
Be aware of bearish divergences developing on RSI and CMF on the 2 hour time frame. If these divergences hold, we might see price reverse soon around this range which is at the AB=CD level and BC inversion level, rather than seeing the price reach the 88.6% XA level.
Trade active:
I have entered this short last night after seeing the price wick up to to the 1.272AB=CD level and BC inversion level. This area also happens to be right at the top of the channel (black trend line) so I believe this is going to be the top for a while
Comment:
One more thing I forgot to mention, the green targets have been updated with the assumption that this is the top of the pattern. Prices are clearly labeled next to the .382 and .618 fib levels
Comment:
Things are still looking good for this trade. We got a spike up earlier but I am not too concerned as price quickly returned back to the range it was moving in the last day or 2. Also, I circled where the top of those candles stopped at earlier. It stopped right at the 1.272AB=CD level, at the black ascending trend line and just above the BC inversion. This is great to see, it tells me that these area is tough resistance and this harmonic pattern is still valid!
As I mentioned, I have already went short on this trade and I will stay in it for quite some time. There is still a possibility we see the price move upwards towards Point D of the harmonic so keep that in mind!
As I mentioned, I have already went short on this trade and I will stay in it for quite some time. There is still a possibility we see the price move upwards towards Point D of the harmonic so keep that in mind!
Comment:
Price is currently fighting with the 200MA on the hourly and the 50MA on the 4 hour. If we can get a candle close below both moving averages, we might finally see a big drop in price. Keep an eye on this!
Comment:
Things are still looking good on this drop, the harmonic pattern is fully in play. Make sure you scroll up to my update because the green targets have changed from the original chart. Before we get to the 1st green target, I expect the price to find some solid support around the 1.30100 to 1.31200 range. Turning on the volume profile on the daily time frame, we see this price range has the highest amount of trading volume. This also happens to be lined up with the 0.236 fib retrace level. This will definitely be an area to focus on next.
Comment:
I entered a short-term long on this last night. So far so good, I will only close out the long-term shorting trade if price breaks black trend line above (around break-even). It's possible we see price come all the way up to re-test this black trend line again
Trade active:
Still on the way down towards target 1 (0.382 Fib in green). I'll be looking to take some profit there