FX:USDCAD   U.S. Dollar / Canadian Dollar
56 0 0
In our last analysis we mentioned about the pullback behavior of an H&S pattern and highlighted it with generic red lines (refer to chart). At this moment, this pullback really occurred and occurred fast (one of the characteristics). Now the obvious question. Will it hold and will the price go down from this point.
Let's look at some factors:
1- Usually H&S patterns are quite reliable and cause the market retreat a great deal. This is almost always true for a real H&S pattern.
2-A fast pullback to the H&S "neckline" (green dotted line) can be considered a somewhat good way to validate the H&S pattern. However the pullback shall show some signs of reversal at neckline. Now this we have at the 240min chart indicated as subsequent inverse hammers.
3-reversals from pullbacks at necklines, usually initiate 3rd waves of the wave count from the Head.

Two things may happen. 1- A real good book example of H&S pattern may ensue.
2-Against all odds, the neckline will be broken and H&S will be invalidated.

What are the odds. If we believe in technical analysis and in this proven pattern, we shall bet on the latter. However do not drop your guards, but be extremely cautious. For risk takers a dollar/cost averaging for shorting the pair may bring some adrenalin pump. For more conservative ones, wait for definite weakness signs at all smaller time frames before the move. For current long positions, we recommend covering your gains/losses at this moment, unless you are truly convinced for the continuation of the bulls. It's all up to you.

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