EUR/USD – Stuck In A Descending Channel
Hi Traders,
As we are noticing a bounce in the forex market and as we are thinking the bulls might be coming back to start doing some damage control, we have to remember to zoom out to see what the real trend is.
When in doubt, zoom out.
On (EUR/USD), In the daily time frame, the price has been stuck in this descending channel since the end of January. Price has been making lower lows and lower highs since the beginning of 2022.
Now, if you were a swing trader and managed to catch that double top at the end of January as a short entry and rode this pair down all this way, you would have made yourself 12% over a period of 100 days. That would be incredibly good and there are a lot of traders that have capitalized on these opportunities to go short that the Euro has given us this year.
For those of us that have not had any short positions and have only missed every possible entry, well, never fear as the markets always have endless amounts of opportunity. If we jump into the 4-hour time frame, we can see that the bulls are showing their horns at the moment. However, back on the daily, it still looks like we are in bear territory.
Now, I like to see a clear bounce off of the support and off of the resistance channel bottom and top to signify and validate a clear channel. Look how many taps we have had on the bottom and the top of the channel. Let's count them out.
Four taps on the bottom.
Six taps on the top.
We can safely say that we are stuck in a channel.
I also like to see the price respect the middle zones of the channel. Notice how the price has done so.
Every time it touches the middle of the channel, it respects that area and treats it as Support and Resistance on the way down.
So, it's all very well and good that we have identified a bearish trend and price stuck in this Daily descending channel. What good is it to us? Well, we have to look for opportunities right? Either to sell or to go long. Right now, there's no point in selling the channel bottom is there? Haha, on the 4-Hour we might see a pattern that we can use to go long. However, on the Daily, we are waiting for the price to close today above the line of resistance I have drawn. Perhaps upon a retracement to that line, we can carry this pair north to the channel top.
Please remember that we need to see a reason to buy and by buying, please remember we will be going counter-trend. So our reason has to be solid. We can use the channel top as a target as we can see previously that when the price touched the bottom of the channel at the beginning of previous months, by the end of the month, the price had reached the top of the channel. This is by no means an accurate strategy that one should employ, I'm just pointing interesting things out. Please trade them at your own risk. However, I would just suggest rigorous amounts of back-testing first.
One more interesting thing to notice – Volume. Look how it has been sloping downwards along with the channel. The lower price got, the less buying and selling there was and the less amount of power it took to push the price down. Should we be looking for a pop sometime soon? Things that make you go hmmm.
On that note, I bid you all a great Tuesday and I will be seeing you all in the next one.
The Vortex Trader
As we are noticing a bounce in the forex market and as we are thinking the bulls might be coming back to start doing some damage control, we have to remember to zoom out to see what the real trend is.
When in doubt, zoom out.
On (EUR/USD), In the daily time frame, the price has been stuck in this descending channel since the end of January. Price has been making lower lows and lower highs since the beginning of 2022.
Now, if you were a swing trader and managed to catch that double top at the end of January as a short entry and rode this pair down all this way, you would have made yourself 12% over a period of 100 days. That would be incredibly good and there are a lot of traders that have capitalized on these opportunities to go short that the Euro has given us this year.
For those of us that have not had any short positions and have only missed every possible entry, well, never fear as the markets always have endless amounts of opportunity. If we jump into the 4-hour time frame, we can see that the bulls are showing their horns at the moment. However, back on the daily, it still looks like we are in bear territory.
Now, I like to see a clear bounce off of the support and off of the resistance channel bottom and top to signify and validate a clear channel. Look how many taps we have had on the bottom and the top of the channel. Let's count them out.
Four taps on the bottom.
Six taps on the top.
We can safely say that we are stuck in a channel.
I also like to see the price respect the middle zones of the channel. Notice how the price has done so.
Every time it touches the middle of the channel, it respects that area and treats it as Support and Resistance on the way down.
So, it's all very well and good that we have identified a bearish trend and price stuck in this Daily descending channel. What good is it to us? Well, we have to look for opportunities right? Either to sell or to go long. Right now, there's no point in selling the channel bottom is there? Haha, on the 4-Hour we might see a pattern that we can use to go long. However, on the Daily, we are waiting for the price to close today above the line of resistance I have drawn. Perhaps upon a retracement to that line, we can carry this pair north to the channel top.
Please remember that we need to see a reason to buy and by buying, please remember we will be going counter-trend. So our reason has to be solid. We can use the channel top as a target as we can see previously that when the price touched the bottom of the channel at the beginning of previous months, by the end of the month, the price had reached the top of the channel. This is by no means an accurate strategy that one should employ, I'm just pointing interesting things out. Please trade them at your own risk. However, I would just suggest rigorous amounts of back-testing first.
One more interesting thing to notice – Volume. Look how it has been sloping downwards along with the channel. The lower price got, the less buying and selling there was and the less amount of power it took to push the price down. Should we be looking for a pop sometime soon? Things that make you go hmmm.
On that note, I bid you all a great Tuesday and I will be seeing you all in the next one.
The Vortex Trader
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