Candles, Moving Averages and the ATR


Opportunities are everywhere when trading and its not just the main popular pairs that react to market forces be they technical or fundamental. This week has all been about the political fundamentals and two of the three major central banks. But as we can see from the NZDCAD pair opportunities are indeed everywhere.  In a strong uptrend on the Daily time frame for most of January the pair posted a near classic Tweezer Top, and strongly bearish Engulfing pattern on Wednesday, which was confirmed on last nights close to trigger an entry to the short side.

1. Tweezer Top completes following…
2. A failed break of the 200 Moving Average and close below of that key moving average.. then
3. Big down candle on Wednesday which Engulfed (Tuesday, Monday and Friday) – Thursday – a Long Wick and trigger on the Close.
4. Entry Today at 0.9068
5 T1 – ATR (Average True Range ) and Number 8  on the chart (80 pips) – multiple it by 1.2 as we are with the Higher Time frame trend (this case the Monthly chart, which is also negative) = 96 pips  – 0.8951
6 T2 – The next resistance / turning area – 0.8888
7. Stop LossWhere the Stop Loss  HAS to be — above the latest High and turning point. – 0.9172

Risk Reward a little over one but has enough probability for system to say go, even though the price has not crossed the 20 day moving average and mid line of the Bollinger Bands (which is one of my key triggers). This area will be the first resistance zone to the move down and if it holds a possible reversal area.


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Stuart Cowell

Senior Market Analyst


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