It’s clear that this market’s core trend pressure is bullish and the market has been respecting the mean value as dynamic support. If the signal plays out and higher prices develop off this one we need to keep a watchful eye on that overhead resistance which is pretty strong.
If resistance doesn’t hold then that will pave the way for much higher prices to develop and let this trend expand.
Gold has also started to trend upwards recently, generating those higher high’s and higher lows. There has been some bullish rejection candles printed this week communicating that lower prices were not favored. Last session a strong bullish rejection candle signal formed with a nice strong close higher than the open price.
Silver also producing similar patterns, bullish rejection occurring this week. Silver has recently seen an aggressive rally and is a little to far from the mean to consider buying from, however if this bullish strength keeps up we may not see the correctional move to the mean we’re after. I think gold is the better market to look at here.
Nice clean trades with an existing trend using price action alone, just love it!
Another market we are watching at the moment is the GBPCAD cross pair, we don’t normally trade it much as it’s usually pretty messy but we’ve seen some strong bullish movement last week into a weekly resistance level.
This weekly resistance level is a really strong, significant level. It has been a major turning point in this market since 2010…
After the market rallied into this level price stalled, then tried to break out above the level and the bullish presence couldn’t maintain these higher prices so the move collapsed back in on itself creating a large bearish rejection candle with a large upper wick that punches through the weekly resistance…
Because the range of the candle is so large we are waiting to see if we can get a 50% retracement entry to help tighten up our stop loss a bit. We don’t normally trade counter trend but because of the significance of this level and the powerful structure in the rejection candle it’s hard to pass this one up.
Just looking back the GBPCAD chart, the counter trend signal off that super strong weekly level did see some bearish price action follow through, however a bullish rejection candle signal has now formed right at the trend mean value, suggesting this market is ready to move back higher.
Those who were in a short here could use this bullish rejection candle as an early warning exit sign for their bearish trade.
A large bullish rejection candle has formed on the gbpusd, bullish picking up off an area in the market that contains trend line and horizontal support. There hasn’t been much of a bullish response here yet but the markets seems to be quiet this session.
This level is also acting as a swing level on the daily chart, where an old swing high is acting as new support. A strong focal point in this trending market that attracts a lot of trading activity.
If this bullish rejection candle plays out with a bullish price action response, then this will be an easy 1:3 - 1:4 trade.
Watching the USDCHF during this London session, price has already fallen back down from an attempted punch upward through this key resistance line.
If prince tumbles and breaks the previous day low that will trigger a bearish breakout trap and reverse trade and Ill consider shorting the bearish momentum. Good target would be the range bottom.
We’ve been watching the gold market closely, recently discussing a bullish price action setup that developed from the 4 hour chart.
We only seen a small bullish response from this setup which is a shame, but a lost opportunity is an opportunity within itself here.
The market closed last session as a ‘Power Candle’ which is one of the price action setups we discuss a lot in the war room. A power candle is basically a candle with a thick long body, aggressive close and no long wicks protruding from the ends.
The basic idea is to to get in with any aggressive continuation after the power candle, so we are looking for any bearish continuation here. A good confirmation is if this session breaks the power candle’s low to consider shorting.
With NFP up tonight things may get a little heated and throw the dynamics of the trade right out.
Price has stormed up the charts quite aggressively, breaking through a resistance level pushing into higher highs. The acceleration was so aggressive price has gapped away from the mean value. When price gaps away so fast you get that elastic band effect where tension grow greater and a correction back to the mean becomes more likely.
The market has started off with a strong h4 rejection candle which lower prices may develop from, some traders even taking this as a mean reversion shorting opportunity.
Ill be waiting for the market to re-test the level it just broke though and confirm it is holding as support by dropping a bullish price action signal.
We didn’t get the bearish correction back towards support, looks like the market wants to test that resistance level at 92.609. Waiting to see how the market reacts with this level, will it break or hold and drop a bearish price action signal.
I noticed today that the EURNZD market is testing it’s range bottom.
An inside day formed as price stalled when the market reached the range bottom, the inside day did have a strong bullish close in its body. If the range bottom holds we could see a bullish breakout of the inside day formation.
It would be better to see the market try and break that support level and cause a breakout trap, then we could have that extra confirmation the market doesn’t have enough bearish influence to break the range. Breakout trap & Reverse trades generally produce explosive moves so a failed break of the range bottom would be that extra confirmation we need to consider going long here.
AUDUSD is not testing a major resistance level, we’ve seen a pretty strong rally into the level and last session closed aggressively into the highs, pressing right up against the resistance level.
We are just waiting to see how price action responds to the level now, will it produce a bearish price aciton signal or will it breakout. If the market does breakout higher, we can wait for a retest of the breakout level and go long off any bullish signals that form off the other side when it acts as support.
EURUSD has surged upwards after the market was pleased with the NFP release. Last session the market stalled and produced an inside day signal. We only have the recent the momentum to back any bullish breakouts, we are scraping the bottom of the barrel for quality setups in these poor market conditions.
However, if the market continues its bullish run and breakouts out of the inside day pattern then we could see a test of the above key resistance level.
Just having a quick look back that the GBPUSD Rejection Candle setup we talked about here last week, the setup had developed nicely into a high ROI trade…
This trade hit a 1:5 resk/return ratio, and it was a pretty simple fire and forget type of trade. Some traders may have taken profit earlier, which is great but now it’s at the stage where we don’t want to be greedy traders and consider an exit now.
The great thing about high return trades like this is that it helps extinguish any losses you may have take, in fact this 1:5 risk reward trade would have made up for 5 previously losses, and lets face it the market has been pretty hard to trade lately so most of us have taken an hit or to.
I like what’s going on here, the bullish rejection is consistent with the recent market movement and it does look like we are going to see a test of the resistance at that 1.34 area. Asian session retracements also provide opportunities for better entry prices.
AUDCAD has punched through a resistance level and is now testing it as a new support level. If the support level holds here we could see higher prices develop as the bullish momentum continues. There is an Inside day right about that support levle which looks enticing. We will be looking for breaks of the highs there to consider taking an Inside Day Breakout trade to up upside. Just have to see how the market opens on Monday.
NZDUSD testing a significant resistance containment line here, this level has acted as strong resistance in the past and has attracted strong bearish activity the last few times it was tested.
An Indecision Candle has formed right at the resistance level, if the low of the Indecision Candle is broken we could consider a mean reversion trade here as there is a large gap between the mean and actual price. When these gaps are created, they generally can’t maintain themselves for long before the market fills the gap when price tries to find value back at the mean.
Just revisiting this Inside Day setup that we spoke about earlier on in the thread…
The setup did trigger when the Inside Day highs were broken but the momentum didn’t pick up until a few sessions later. Two bullish rejection candles dropped afterwards, demonstrating that the mean value was holding as dynamic support, which is a good bullish indicator.
Now the market has exploded higher and broken through an important resistance level on the daily chart, we are now waiting for that level to be retested as support via a bullish signal we can consider buying into. Most traders who took this one have taken profit after that explosive power candle, as we don’t want to be greedy.
Do you usually advice a confirmation signal after the ( potential price action signal) at the support line? Or a pending order after the PA signal would be better?
Brokers love hunting the most obvious entry points and then maybe the trade goes in the opposite direction of our choice.
Any advices about it?
Thanks
Yes I am waiting for a price action signal to communicate that level is going to hold at support, I don’t blind trade touches of support and resistance levels. Yes you’re right, fake breakouts can occur at these focus points, and you never know the market could turn over here and smash right through that level. After price accelerates so far away from the mean like this, the ‘slingshot’ effect back to the mean can be quite harsh. Just playing it candle by candle.
hi, i have read through alot of the posts in this topic. One thing i would like to clarify when using this system is, can i place a trade using a valid signal(pin bar, inside bar) against the trend?
There is nothing stopping you from doing that, you can catch some good moves with counter trend signals but trading against the trend is always a lot riskier.
When trading counter trend, I try to trade when price has stretch away from the mean value, price generally likes to hug and stay close to the mean value, so when it gets too far away, the chance of a correction becomes greater. When you get countertrend signals at those extreme prices you start to build up some value into the trade.
Also strong weekly levels are good to trade counter trend signals from, using daily signals off weekly levels I mean.
thanks for the super quick reply! i would like to ask u if this is a valid set up for a rising trend channel to go long since there is a pin bar indecision candle at the channel’s resistance.
Well a bearish rejection candle indicates moves into higher prices where denied, that’s not a case to build a long trade off, you go long from bullish rejection candles.
What you really wanted to see here is a bullish rejection candle off that trend line, but since there is a bearish candle there it indicates there is a long of bearish pressure right on that linear trend line support and it may break.
