Gbp/usd - Repeated Pattern And Possible Outcomes

Discussion in 'Trading' started by hevaystos, Aug 2, 2011.

  1. hevaystos


    Aug 02, 2011 : 4:30 a.m. GMT

    Weekly Chart:

    The pair failed, as expected before, to surpass the major resistance level (@ 1.67520), retreated from this level violently and then penetrated the rising yellow trend line. The RSI failed, during the nearly 12-month advance, to threaten its Bull Resistance Level sending a clear weakness signal. If the mentioned breakout proved to be decisive, or in other words, if the current pull back move to the broken “Rising Wedge” run its course shortly, then we can tell that a reversal signal has already been triggered, and a set-back to the lower support level (@ 1.53516) should come with no surprise.

    Technicians are always searching for repetitive patterns, believing that History will repeat itself. We found one and we need to describe it and then pinpoint the possible outcomes.

    Daily Chart:

    The characteristics of this repeated pattern are as follow; Wide topping pattern (looks like a normal head-and-shoulders), down-breakout, successful pull back move to the rising neckline, a decline to a new low, and finally a return back again over the neckline signaling a failure down-breakout (Bear Trap).

    I heard this before; “in many cases, unsuccessful patterns proved to be more important that successful ones”. But, in our case, a Bear Trap signal just leads to a new topping pattern and another, but very decisive this time, down-breakout.

    The pair can threaten April highs, but no genuine move is expected unless the pair penetrates the major ceiling level (@ 1.67520). Should history repeats itself, a decisive down-breakout below the rising yellow line (below 1.62230) should trigger your sell stop.

    Ramy Rashad, CMT