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EURUSD, after a series of failed rallies, met by supply and lack of demand, is now breaking-through a down trendline.

1. Here we saw significant supply which VSA marked as a purple dot, and afterwards more supply on the way down. Still on this correction, we saw a high volume bar making a significant higher high than the previous ones (3rd red arrow in the chart), though it closed on the lows. This was a fake-out rally that made many traders believe that EU would keep rising, but in the end it was met by heavy supply which made the volume spike, and closing on the lows.
2. After a demand (blue signal), EURUSD attempted the 2nd rally, and while successful at first, during the Christmas time the lack of activity prevented prices from going upper and breaking a resistance. Supply afterwards (light blue dot) would mark the beginning of another general fall in prices.
3. Right now, after a trendline breakout attempt, that was met by significant selling (probably from traders trying to catch the down move), it finally broke through in the recent hours. The volume isn’t that high though, and the supply signals before, while below the trendline, could be excessive supply. A rally would confirm the strength, a dip or the break of 1.105 being the trigger. If however there keeps being supply in the market even above the trendline, the prices may not hold much longer and we might see another bearish movement similar to the previous ones.

Our newest indicator Reversals was just released today. This is an indicator that recognizes patterns in price and volume action to determine price reversals accurately. These should be used within a trading system, either as entry or exit points, or as a confirmation of a trend reversal. It looks for different patterns than VSA does, so both can be complemented. The indicator also brings an adjustable sensitivity, changed directly in the chart, which allows to very easily adjust the indicator to the market and to your own trading method.

Reversals in EURUSD H1 with sensitivity = 8 (FxPro feed):
 

 
Reversals + VSA in EURUSD M15, as the price is bouncing on a support. VSA shows the background is still weak, though there has been accumulation recently at this level, shown by the green and blue dots/squares (Demand signals) before. Reversals on the other hand pointed out the reversals that VSA failed to, such as the last bounce off the support, as well as the most recent tops, as is normal with a high sensitivity (9). The most likely and strongest reversals are usually when VSA and Reversals both agree. If you’re already using VSA, check the blog regularly, where we will do posts that show how to combine these 2 indicators.
 

 
Click here to try a free demo on Reversals, and check Reversals page for more information.
 
Best regards,
Analytical Trader team

In this trade I want to point out a mistake which is better to avoid if you do not want losses.

What was right in this long trade:

2. Strong signal (Minor Demand) before trend changed.
3. Dynamic trend turned from red to green – this is the right sign for a long trade.
4. Entry was made in a low volume down bar. This is basically o’k, only one thing – price moved quite far away after the trend changed.

What was wrong in this trade:

1. There was only one missing thing – background was still weak. You do not have to go against the background, because even if other components are right for a long setup, it is most likely that this will not be a winning trade. If background is weak it means that imbalance between supply and demand is in favor of supply.