Do you trade head and shoulders patterns?
The USD strength continues and has gained significantly against weaker currencies such as the Swiss Franc.
This has led to the market forming the key head and shoulders pattern offering us a trading opportunity.
Watch the video to learn more…
Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
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In this video, we will take a look at USD/CHF as the price has completed the inverse head and shoulders pattern.
We can clearly see, here, that the market has been down-trending for a while and the USD/CHF is very much the opposite of what EUR/USD has been doing. These two work quite similarly, and we can see, here, that the market formed a nice clean inverse head and shoulders pattern: with the left shoulder coming through here, the head being this low through here, and the right shoulder completing when the price has broken out of the resistance level.
So, looking at this, we can look at a couple of different options. Now, looking at the higher timeframe on USD/CHF, we can see on this daily timeframe that the downtrend is quite significant and the previous structure low is sitting around 0.9, and we can see that the price found support here, here and here.
I’m expecting the price to come and retest this structure point for either some potential downside or a break, retest, and for the price to trade back within this range, there. If that’s the case, we can start looking for some potential short-term opportunities.
The first area that we’d look at for a buying opportunity is that breakout area. This is backed up by a high volume area as well, and what I mean by that is that the price has found resistance here several times recently until the breakout point.
First things first, I’d look at this area, 8918, for a long opportunity towards that 0.9 level. However, if the trend is going to be quite strong after this breakout, what we may see is the price stalling, and I’ve pointed out another level of 8940 or 8939, and if I zoom out a little bit and look left, we can see that the price, here, found some support and resistance.
We may see something a little bit different. Suppose, the price starts stuttering here and we start to get a little bit of a smaller timeframe range or a consolidation pattern here. In that case, we could be watching this 8939 area for a potential false breakout and the continuation of a rally up into that 0.9 level.
A couple of different options to watch here on USD/CHF: now that we’ve got the breakout of this inverse head and shoulders, I’ll be looking for long opportunities either at 0.8918 or a consolidation breakout around 8939.
I hope you enjoyed the video update. If you did, give the video a thumbs up. What do you think is going to happen to USD/CHF? Leave a comment below.
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