On the technical side, we can now see the contour of a 5-point extension structure: a taking shape on the 30M chart. The price comfortably passed the B point on its way towards the potential reversal zone (PRZ). When defining the PRZ for a , we look at the projection of three levels. I: the 1618 expansion of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: an extreme BC expansion (in this case 3142 BC ). For patterns, the XA and BC expansions are the most critical levels of the PRZ and are closest together, so in this scenario I assume the reversal of price might happen near these levels (as represented by the two lowest orange lines in the chart).
Reversals for patterns can be dramatic after briefly testing the PRZ and extreme price action as it approaches the completion point is not uncommon. However, this should not make us trigger-happy. Control your risk. Those who know me, know I enter trades conservatively so I will at least wait for the XA expansion to be tested and for subsequent signs of decisive reversal of price action before entering this trade. SL goes 10 pips behind the next . TP1 = of AD and TP2 = of AD. There are 130 pips on the line and the trade has an excellent reward – risk ratio of 7.0!
UPDATE 1: Reversal got triggered smack in the middle of the PRZ this morning. PA went up dramatically by 100 pips, passed TP1 and is now on its way to TP2.
UPDATE 2: Price just touched and passed TP2.