Here’s a trade idea for you, shorting EURUSD on the 4Hr or 60 minute timeframe.
First, we have have a short term bullish trend line on the Daily chart which has been broken and price has now come back to retest the trendline as resistance.
On its own, this would be a uselessly weak sell signal, but if we drill down to the 4 Hour chart we start seeing a confluence of factors to bolster our suspicions that price is about to go south.
A double top has formed at a 1.3010 resistance level which is a previous support level too – two more short signals. In addition that price is the 50fib of the swing high at 1.3140 (not shown). 50 fib isn’t a true fib level, but enough people look at it to make it significant.
Finally, we even have correlation on the 60 minute chart in the form of Reversal Divergence between the last two swing highs. Price has moved higher, but the Stochastic peaks have moved slightly lower showing a slowing of buying momentum – a good sign of reversal.
So in summary:
- We have the trendline support being tested as resistance.
- We have a previous support level being tested with as a double top.
- The double top price coincides with the 50fib of the previous major swing high.
- There’s reversal divergence on the 60 minute chart.
All in all, we have some great signals across three timeframes showing that price is about to go short, at least in the short term. Going against this is that this is the Euro Dollar, which is particularly sensitive to news right now and this is Non Farm Payroll week.
If it wasn’t for that, these are exactly the signals I look for to get into the sweetest trades!
Adam - The Day Trader