NZDUSD Trade Idea

NZDUSD has thrown up a trade possibility in what has otherwise been a pretty choppy and directionless market. It’s much like the previous trade idea at the beginning of November in that there’s a trendline flip on the Daily chart with a double top on the 60 min chart.

Let’s have a look…

Chart of NZDUSD

NZDUSD Daily Chart: Lower highs & lows and a trendline flip.

The Daily chart got my attention because the blue supporting trendline has been broken and has now become resistance (blue circles). This is a lovely bit of price action hinting that the bulls are leaving the market. In addition, we’re getting lower highs a lower lows shown between the purple lines.

So this is a good start, however it’s always a good idea to get lower timeframe correlation as a confirmation and for a more efficient entry, so onto the 60 minute chart:

The NZDUSD 1 hour chart

NZDUSD: Double top and Inside Bar

A quick look at the NZDUSD 60 minute chart immediately shows a double top (marked in yellow circles) which is a strong indication that the buyers are exhausted. As Al Brooks says in Reading Price Charts Bar by Bar, “if the market tries to do something twice and fails, it will usually do the opposite”.

At the time of taking this snapshot we had an inside bar forming at the Daily Pivot level, a sign of indecision. A break below this and the pivot will be a good sign for going short, a bounce back up and we’ll have to sit back and watch subsequent price action to see if the bulls are back in.

NZDUSD Trade Entry: The congestion shown on the current 60 minute chart needs to be resolved, and my preference would be to see a break and retest of the Daily Pivot. I’ll then sell the break of that retest.

I’ll follow up this blog and examine whether this trade triggered, and if so, whether it was a winner or loser.

 

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About TheDayTrader

My name is Adam. I'm a day trader. I've been trading full time, mostly Forex but stocks and indices too since 2009 and I love it. When I'm not trading, I'm writing about trading here and for trading magazines, learning to fly and enjoying country life in the Cotswolds with my wife, dog and chickens.

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