Although the retracement/pullback on this pair is quite shallow my reasons for taking a long position are:
- Bullish/reversal bar following 2 seller bars - Support at 1.3100 with close above - 8 ema rejection/support and close above - 0.382 Fibonacci level rejection and close above - Stochastic and RSI convergence
entry - above high of low test bar stop loss - below low of low test bar target - above previous high for at least a 1:1 Reward:Risk trade
I believe you forced the "convergence" into your analysis. The price has made a new high (just barely) but the indicators have not, or have done it at such a small degree that it should be ignored, in fact it should be taken as a divergence.
There is divergence between the tops at 07/20 and 07/24 which should not be ignored, there is even a larger divergence on the higher time frames (240/480) which would overwrite anything you can see on the daily chart.
Also, the price was unable to reach the upper band of your trend line, this should tell you buyers are tired and are unable to push price in such a way as to continue the trend.
As for the "bullish/reversal" bar.. hitting a trend line and bouncing is not a reversal, it is expected as most people will buy here, but they will be disappointed due to the points I made above, it's a failed bounce, not a reversal due to one that just BARELY managed to turn green.
Just my personal thoughts, good luck trading!
amanpaulbhogal
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Hi ZDRuX,
I appreciate you sharing your personal thoughts on my analysis.
Yes, the convergence is subtle, and in many cases can be regarded as divergence. I am, however, matching the peaks on the two obvious swing highs on price action with corresponding areas on the oscillators which, for my judgement, is sufficient to pass as convergence rather than divergence.
I didn't care to look at time frames below the daily as I had enough reasons to take a long position. Divergence on those lower time frames you mentioned during that period have no bearing on yesterday's potential long opportunity as price continued producing new cycles of higher highs and higher lows.
With regards to the "bullish/reversal" bar, I didn't specifically mention the [set up] price bar bouncing off of the rising trend line or trend channel as quite clearly it doesn't . The use of "reversal" in this context is the potential initiation of a price action phase in line with the underlying up trend since. The last bar appeared pretty green to me when I was analysing the charts. Perhaps there was a temporary glitch in the display of the most recent price bar during the open as can sometimes happen.
I took this opportunity, which failed to trigger today, based on an aggressive trend with price cycling above the 8 ema.
I believe you forced the "convergence" into your analysis. The price has made a new high (just barely) but the indicators have not, or have done it at such a small degree that it should be ignored, in fact it should be taken as a divergence.
There is divergence between the tops at 07/20 and 07/24 which should not be ignored, there is even a larger divergence on the higher time frames (240/480) which would overwrite anything you can see on the daily chart.
Also, the price was unable to reach the upper band of your trend line, this should tell you buyers are tired and are unable to push price in such a way as to continue the trend.
As for the "bullish/reversal" bar.. hitting a trend line and bouncing is not a reversal, it is expected as most people will buy here, but they will be disappointed due to the points I made above, it's a failed bounce, not a reversal due to one that just BARELY managed to turn green.
Just my personal thoughts, good luck trading!