This continuation play is somewhat related (call it the prelude) to the trade idea linked under "Related Ideas". After the strong US jobs report on Friday, this pair became instantly bullish and gained 185 pips. We now have a bullish rectangle developing on the hourly, which could serve as an entry pattern for a continuation of the trend. Inside the rectangle price made a retracement, giving the highly oversold RSI some relief, as a consequence its now no longer oversold. The retracement of the prior swing high was shallow, indicating a strong underlying trend.
Assumption is PA will break to the upside of the rectangle, retrace back into prior resistance, which should then serve as support and continue its way up. The price movement is estimated by taking the height of the rectangle and expanding it in the direction of the potential breakout. This happens to coincide with a resistance zone at 119.7-ish, which in turn is where the price reversal zone of the bearish Gartley on the 4H begins (see the related idea linked at the bottom of this page).
Sketching a scenario of what might happen for this trade candidate is one thing, but I would only enter the trade based on what I would finally see in the chart. Should PA break to the upside, retrace back into the top rectangle line and find support there, I would enter long with SL below the support. TP1 = traderisk and TP2 = expansion of the height of the rectangle upwards.
There are 48 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 4.4!
UPDATE: Though PA first broke to the downside of the rectangle (which was not foreseen), it eventually rallied back up and it broke the upside of the rectangle on Tuesday. As per the sketched scenario of this trade candidate, price then retraced back into the broken resistance, which served as support and provided a nice entry point. PA then continued its way up, hitting both TP´s.
Assumption is PA will break to the upside of the rectangle, retrace back into prior resistance, which should then serve as support and continue its way up. The price movement is estimated by taking the height of the rectangle and expanding it in the direction of the potential breakout. This happens to coincide with a resistance zone at 119.7-ish, which in turn is where the price reversal zone of the bearish Gartley on the 4H begins (see the related idea linked at the bottom of this page).
Sketching a scenario of what might happen for this trade candidate is one thing, but I would only enter the trade based on what I would finally see in the chart. Should PA break to the upside, retrace back into the top rectangle line and find support there, I would enter long with SL below the support. TP1 = traderisk and TP2 = expansion of the height of the rectangle upwards.
There are 48 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 4.4!
UPDATE: Though PA first broke to the downside of the rectangle (which was not foreseen), it eventually rallied back up and it broke the upside of the rectangle on Tuesday. As per the sketched scenario of this trade candidate, price then retraced back into the broken resistance, which served as support and provided a nice entry point. PA then continued its way up, hitting both TP´s.
You don´t need to be a weatherman to know which way the wind blows - B. Dylan
