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EUR/AUD Rally to Stall?

Last updated 4/23/2009 7:13 PM EST (GMT -5) 0 Comments - Add your comment

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There had been a bearish channel that is forming on the 8hr Chart of the EUR/AUD.  There has been a breakout above the top of the channel.  However, the pair is still technically in a downtrend until a new high is made above 1.8582.  A pair can break out like we see here and quickly move back down into the channel.  Additionally, the bearish Gartley and double top is very symmetrical and setting up quite nicely.

We are looking to sell the EUR/AUD if it rises to 1.8582 (Point D).  Point D is located at the convergence of the following points:

This pattern is fairly straightforward, and there are not a lot of extra points to cover.  So far, this pattern is setting up like a textbook trade opportunity.  We will now go over what to watch for assuming the pair continues rising to our entry at 1.8582. First, we need to watch how quickly CD completes.  We are looking for the CD leg to rise slowly and enter the trade near our hypothetical entry on the 1hr Chart.  If there are long bars near the completion of the CD leg, we will not take the trade.  If the pair comes within 15 pips of reaching our entry, does not enter, and reaches T1 before entering, the trade is invalid.  The trade is also invalid if the pair falls below 1.8275 before hitting our entry.

To recap, we will look to sell the EUR/AUD at 1.8582 with our stop placed at 1.8645.  Our initial profit targets are 1.8496 (38.2% of CD) and 1.8419 (61.8% of CD).

8hr Chart - Bearish channel broken; downtrend is still valid.	1hr Chart - Bearish Gartley; sell @ 1.8582.

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About The Author

Bradley Gareiss has been a technical analyst with GFT since 2008. Brad is known for his ability to identify high probability trading opportunities through geometric pattern recognition. He also focuses on trading psychology and risk management, and has written many extensive articles on these subjects.