When defining the potential reversal zone (PRZ) for a , we look at the projection of three levels. I: the of XA, II: an AB = CD pattern and III: a BC expansion converging in the same area (in this case 1414 BC ). This defines a tight zone, about 22 pips wide, represented by the orange lines in the chart. There is also some structure in this zone, which increases the edge of a reversal. Should price action test the PRZ and reverse convincingly, I would enter short. SL goes 10 pips behind the next . TP1 = of AD and TP2 = of AD.
There are 235 pips to be made (if this pair follows the script) and the trade has a reward-risk ratio of 2.2!
UPDATE 1: Price is testing the PRZ.
UPDATE 2: PA did exceed the PRZ somewhat, but did not invalidate the and quickly reversed. I entered short at the lower limit of the PRZ and am currently 92 pips in this trade, which I am holding over the weekend.
UPDATE3: PA hit TP1 and I took profit on 1 position for 142 pips. I rolled SL into profit, so from now on I have a risk free, profitable trade. The trade management of the second position has become a management of profit. Lets see how far it can reach!