Price action analysis in hindsight

Hello, I am pretty new to Forex trading and am learning about support & resistance levels.

In the below image i have drawn my support and resistance lines at a small area of consolidation on september 6th 2016. Now the candle that I’ve highlighted has broken through my resistance level and has a large wick. From what I’ve learned so far is that you can expect the price the drop back down because it was rejected above the resistance line but instead the price moves up. Did I draw my lines correctly or is the wick not long enough for it to be a pin bar? Looking back, could this move have been predicted?

EURUSD 1 Hour chart september 6th 2016


Thank you.

Good post, and good questions …

I agree that on balance, you’d probably expect the price to go down rather than up after that candle.

I don’t disagree with your lines.

It’s not quite a pin bar, per se, because the gap between the open and close occupies slightly too high a proportion of the overall length to classify it as that (I always think of pin bars as being 75+/80+% wick), but still …

I think all it shows is that nothing is ever reliable, and that you can “predict confidently only with hindsight” (as Yogi Berra probably said). If you can get 60% of these right, you can do well enough out of them with appropriate risk management, position-sizing and trade management, and I’d venture to suggest that your thoughts would be right in 60% (or more) of instances like these, and this was just one of the other 40% of the time?

Encouraging to see someone pretty new to forex trading looking at support and resistance and drawing lines like this. Good luck and good wishes, and I’ll be interested to see what others say about your 1-hour chart.

Thank you Lexys and Manxx, your answers definitely gave me a better understanding of the price movement. I will be looking more into breakouts and indicators in the near future. :slight_smile:

Actually i would have entered on the bullish engulfing candle 5hrs before the one you enlighted and would have put my stop loss few pips below the low of that candle