Video Analysis of the Daily and 4 Hour Charts

This False Breakout Setup and Signal that were seen a few days ago have now led to a strong Bearish reversal back inside of the Range Setup on the Daily Chart.

[video]https://youtu.be/A4P_P_mA6MU[/video]

Some traders would have entered short after seeing the Double Tops appear above Resistance. With entry at this area and a target set for the Support, they could be now be earning close to 300 Pips from this trade. For others who waited for the break inside of the Resistance for added confirmation, they could be up between 90 to 200 Pips.


False Breakouts take place all the time with Consolidation, and the Double Tops/Bottoms are common signals that lead to these sharp moves.

Once the Support is hit, there are three possible scenarios that could unfold…

Duane

VIDEO ANALYSIS OF EURO USD

I had anticipated that a pullback was going to take place on this pair as it had reached the Breakout Equivalent of the Pennant.


As can be seen in the graph below, this pullback has now started with a few bullish candles.


This Breakout Equivalent is something you will see across the market. All Consolidations break towards these targets before either pulling back to start an opposing trend or pausing before resuming the current trend.

In the case of the EURO USD, given the predominant downtrend, we are likely to see another bearish signal that signals continued gains for the USD in the weeks ahead.

This Breakout Equivalent is a key aspect when it comes to trading Consolidation Breakouts. They are an excellent way of setting our targets ahead of pullbacks.

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We are very close to hitting the major Outer Uptrend Line on this pair, having broken out from several Consolidation Setups. However, whenever the market approaches these major barriers, we usually have a slowdown that makes trading at these areas very risky.

As the market slows down - due to a build up of opposing Entry Orders, the market has a tendency to become erratic as it forms a setup to reverse before actually hitting the Trend Line.

This has happened with the USD CAD and now looks set to take place on the AUD USD as well.

As tempting as these trades can be - since we are 70-100 Pips away, which would be a good trade - avoiding trading here is the better decision.

[B]Duane
DRFXTRADING[/B]

We are only a rally away from this pair completing the Pennant Setup on its Daily Chart.

As you will see in the graph in the video below, a strong Bullish Break above the Downtrend Line will indicate that we are headed to Resistance. This would complete the Support Boundary as well.

If the Signal is strong enough and is supported by a good setup on the 4 Hour Chart, I will consider trading it according to my Methodology. Given the distance to Resistance, between 150- 200 Pips will be on offer.

[B]Duane

DRFXTRADING[/B]

Hey all, how´s the trading going?

As was predicted yesterday, the AUD USD has started to pullback after being volatile above the Outer Uptrend Line.

PROJECTED MOVEMENT


BULL CANDLE - REVERSAL STARTED?


Based on this, we are likely to see the market either;

  1. Rally, forming a Setup that leads to a stronger Breakout above the Downtrend Lines.

  2. Move sideways to form a stronger Consolidation before breaking the Outer Trend Line.

[B]Duane

DRFXTRADING[/B]

Hello all, how´s the trading?

Apart from some brief volatility related to the USD NFP this morning, the Euro didnt really move much today against the AUD. Right now it appears that a Range Setup could be taking shape on the Daily Chart, with a Bearish Wave left to complete the Range.


If we see a break of the Uptrend Line - most likely with a Bear Crown - then we will see the pair head towards the Support boundary already formed…


Duane
DRFXTRADING

Having broken through several Downtrend Lines with a sharp rally, this pair has now finally taken a breather below the last major Downtrend Line. Right now it is too close to this Trend Line to justify a trade, because as we now see with the AUD USD above, things tend to become erratic when we`re this close to these major boundaries.

So with that risk in mind, the better option seems to be to wait it out until we get a break bearish to resume the major Downtrend. Trading within this boundary can be done BUT!! whenever these Consolidations are this small, they usually are difficult to trade. The safer option is always to wait for a clear breakout.

Hey guys,

It looks as if this Downtrend will be headed towards the Outer Uptrend Line following the Bear Crown (very common nowadays ) that led to the break of the Inner Uptrend Line…

We are now seeing a Range Setup below this line at the Inner Downtrend Line and just below the Outer Downtrend Line. Given the greater bias to the downside, this Range should give way to a break of its Support boundary over the next few days to carry us to that Outer Uptrend Line.

However, what you will find is that even though most breaks from the Inner Trend Line tend to go to the Outer Trend Line, once this major trend is still in place, it could also U-Turn to resume this trend without hitting the Outer Trend Line. Nevertheless, given the strong Bear Crown Setup that led to this new Downtrend, the more likely scenario seems to be a continued move towards the Outer Uptrend Line.

The analysis is good, but too many trendlines being marked at different time frames. Initially it is confusing but when we co-relate with the actual market movement the analysis is fruitful.

Hey man thanks,

Ok, less trend lines would make it easier?

Well based on how I use Price Action, it requires these Trend Lines in order to explain important movements such as breaks that take us from one Trend Line to another etc. and to show those who use them how to draw them.

However, if some of these are not necessary in explaining whats happening then I can adjust.

I understand that zooming in and out of the trendline according to the different timeframe analysis is essential, just that a little bit of too much for newbie or amateur trader.

Is there any way that we can just use the trendline at the larger time frame and keep the same as reference for trading, just my query. Thanks.

VERY educational. You do a great job of explaining the all the possible scenarios to keep an eye out for. Please continue to keep this thread active as I feel it may be one of the highest quality educational threads on this board.

If I may ask, what do you think about the pennant that appears to be forming above .6500 on the NZD/USD pair?

Hey RoyalBlood,

I understand your concern.

The problem is that when I zoom in, there are additional Trend Lines that are formed that may not be visible when I zoom out. So just using the trend lines from the wider view may lead you to miss important things taking place such as Trend Line breaks on a closer view.

As you get used to them, it will become easier.

Regards

Hey PoPip thanks for the good words. How is your trading going and what strategy do you use?

Yes that is a Pennant being formed. I actually anticipated it on Monday. It was either going to be a Pennant or Double Bottoms…



I was actually leaning more towards it being a Pennant…




…one of the “tricks” or dynamics of the Forex that can lead to losses.

Right now it could lead to a breakout to continue the Breakout from that Range Consolidation or rally briefly above the Downtrend Line…

PipPop

I had also forecast a similar but much larger Pennant setup to be formed on the EURO USD as far back as June this year…


…which seems to be happening/happened now…


The market tends to give us a heads up as to when these patters are going to be formed (such as weak breaks of CTLs in the NZD USD example). Another signal is when we have 2 consecutive waves of Bullish and Bearish Waves of the same size that appear at the end of a large trend…


…that eventually lead to the Pennant being formed…


This is what I had seen in June and what I expected to be formed.

Trading within them is always possible such as in this example here…


…but sometimes the waves within them are too volatile to be worth the risk. Right now I am waiting on the right signals to trade this EURO but so far it looks as if I might have to forgo it.

Trading within them can be done several times until the breakout takes place which will offer even greater profit potential.

[B]Duane

DRFXTRADING[/B]

Thanks for the analysis! Very informative.

My current strategy (forward testing on demo) is identifying S/R and recent trends on daily charts, and using price action signals on 4 hour charts to enter with the trend as a pullback to the trend line is seen. I’m not currently trying to trade breakouts, but I am keeping an eye on the subject and studying them to possibly trade them in the future.

ok cool.

Support and Resistance can be good tools…if you catch the best ones you can definitely get Pips from them. Problem I always had was knowing whcih of them would be strong enough and how many Pips I could get from them. Another issue was how far to place the Stop Loss since some S/R required only 10 Pips while some required 50 Pips…was difficult to create a strategy based on these moving parts.

What are your targets and Stop Losses?

Breakouts are very powerful setups, and once you analyze and trade them correctly with the right strategy, they can be a good weapon in your arsenal.

Yep I ran into the same issues with support and resistance early in my studies. Now I only mark really obvious ones, especially if they coincide with a psychological level. I’ve found trend lines to be much better indications of where price is likely to reverse, so S/R only come into play when I’m setting stops and targets to determine if the trade is too risky.

I’ve been setting my orders with a 1:1 risk-reward, first setting my stop at a logical point below the trend line (for longs) or above the trend line (for shorts), then ensuring that my target seems logically reachable. Lately I have been moving my stop along the trend line to reduce my risk while still allowing for price to bounce in my favor.

I still have a ways to go before I understand even half of this stuff, but these videos are brilliant! I really appreciate the way you go through these trading situations and fully illustrate the concepts with multiple examples and show the varied opportunities involved in these situations. Cheers!!

DrAndy

Thanks man, glad I can help. There`s much more where that came from, but I can only show you the free stuff…lol

How´s the trading going and what strategy you use?