PA so far only traveled 20% from C towards the potential reversal zone and has yet to pass the B point, so we are nowhere near completion but I like to look ahead and be prepared just in case, since I can only profit from that which I anticipate. I am not making the case here that completion will happen; I am merely saying that if it happens, I will buy this pair upon reversal. So this trade candidate goes on my watch list for next week.
When defining the PRZ for a , we look at the projection of three levels. I: the of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: a BC expansion (in this case 2240 BC ). This defines a very tight zone, 7 pips wide, represented by the orange lines in the chart. The confluence with the lower of the channel increases the chance of reversal upon completion of the price pattern.
Should the price drop enough to eventually test the PRZ, stabilise and reverse convincingly, I would enter long, basically buying the low in a . SL goes 10 pips behind X. TP1 = of AD and TP2 = of AD.
There are 80 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 2.9!
UPDATE: Price never completed the pattern, so there was no entry signal for this trade. No problem, nothing was risked and nothing was lost. On to the next trade!