There is a very interesting pattern in AUDUSD chart. Movement is limited by two important lines:
- Upper limit: long-term resistance
On 04.12.15 we had high activity on the top of the market when price was near the level of previous high (look at the volume and spread). Then up-thrust happened. Up-thrusts can be recognised as a wide spread up-bar, accompanied by high volume, to then close on the low. Up-thrusts are usually seen after a rise in the market, where the market has now become overbought and there is weakness in the background. Up-thrusts are frequently seen just before a down-move. Analytical Trader has also detected weak signal (Supply) on this bar. The market started to move down. I want to draw your attention that high of up-thrust is slightly higher than long-term resistance (previous maximum). Usually traders place stop-losses on this level or buy-stops to open a long trade in this place. In our case the stop losses were activated, long trades were opened, but the market has immidiately turned down leaving the traders with losses. This is a quite reliable setup after which we can expect prices to fall.
- Lower limit (support): up-trendline with several touches (already 5 times market turned near this line)
The longer support is showing itself, the stronger it becomes. Reversal signals appeared each time before market turned.
Now there is a high probability that prices again approach the long-term resistance. This pattern is also known as an ascending triangle. Eventually market will break one of these lines. VSA and Reversal indicators will help us understand the direction of break-out. Usually it is accompained by high volume and wide spread bars.
NZDUSD H1 Trade analysis:
- At the time of entry background was strong – background didn’t have time to turn weak and it is wrong to go short in this case
- Weak signal (Minor Supply) before trend changed (moreover this signal appeared near mid-term resistance) – this is a correct setup for a short trade.
- Entry after dynamic trend turned red – it is o’k (the best way to open trade in a low volume up-bar while the price is not far from market turn). It is better to place stop-loss above resistance (in our case it is below – not o’k).
- Trade has to be immediately closed after two Minor Demand or Demand, Major Demand signals, because there is a big chance that prices will turn direction after this signal. Reversal signal also confirms market turn in this place.
This is a near resistance trade which was opened after up-thrust in USDJPY.
In this chart we have long-term resistance which was created by previous high. At first market was rising, than we had an up-thrust (2 wide spread bars with high volume).
Up-thrusts can be recognized as a wide spread up-bar, accompanied by high volume, to then close in the middle or on the low. Up-thrusts are usually seen after a rise in the market, where the market has now become overbought and there is weakness in the background.
High of the first bar has almost reached the resistance level but closed in the middle. Further weakness showed in the second bar which closed on the low. VSA indicator detected 2 very weak signals here (Major Supply). Reversal indicator also suggested that market can turn in this place.
- In H1 timeframe background was neutral. In this case you should check above timeframe. H4 was weak, so it is o’k for a short trade.
- Several very weak signals (Major Supply). Reversal indicator also confirms market reversal in this place.
- Entry was made when dynamic trend was red.
- Exit after 2 Minor Demand signals (Reversal signal also confirms the exit)
Total: + 110 Pips
In daily timeframe it is obvious that USDCAD is moving in Mark-up phase (market is rising). Up-trendline is supporting the price (price turned near this line 5 times already). Background is strong.
In H4 timeframe we can see that character of movement was changed after the price has broken resistance created by previous high (note that there was no weak signals in this timeframe or Reversal signal when price approached this resistance). After the resistance was broken, market started to move up with new pattern (angle is very steep). It is possible to draw another trendline here. There is no resistance at this price level. Background is strong, therefore we can look for a place to go long. But be careful if you see stopping volume or buying climax, because the angle of up-trendline is too steep. Very often you can see such movement before market reversal.
USDCAD M15 Trade analysis:
In this chart you can see a very popular entrance among traders – buy stop at the level of previous high. I will analyze this trade from the view of Analytical Trader.
- At the time of entry background was strong – it is a correct part for a long setup.
- There were several weak signals (two Minor Supply) before trend changed and no strong signals. It shows that selling has entered the market. It is very risky to go long in this case.
- Reversal signal also confirms that market can turn down in this place.
- Dynamic trend turned from green to red – it is wrong for a long setup.
- Trade has to be immediately closed after two Supply or Supply, Major Supply signals, because there is a big chance that prices will turn direction after this signal.
“Reversal” is our new indicator which accurately detects price reversals. It can be used alone and together with VSA indicator. In last case you will have the greatest advantage in your trading and the best view of the market.
AUDUSD was moving in descending triangle. It was possible to draw a down-trendline and market turned 4 times near this resistance. Lower limit of this triangle was a support line. Recently it was broken by wide spread down-bars with high volume.
The following trade was opened after another reversal near the down trendline:
- At the time of entry background was weak.
- Weak signal (Minor Supply) before trend changed. Reversal signal also confirms market reversal in this place.
- Dynamic trend turned from green to red.
- Entry when price still didn’t move too far (stop-loss is placed above down-trendline)
- Exit after 2 Minor Demand signals
Total: + 77 Pips
