EURCAD's Been Choppy and Enters Resistance Area

Cory Mitchell, CMT

The EURCAD could break higher, in which case I will look to enter long on a pullback after that happens. Right now, the more interesting trade to me is a potential short if the attempt to move higher, above resistance, fails. 

This has been a choppy pair, loaded with opportunities related to false breakouts over the last few months. 

The chart shows multiple supply and demand levels (article on these is upcoming!), as well as some patterns.

EURCAD 4hour chart in resistance area but in rising channel July 17 2020

There is a bullish bias to the pair right now. We can see the rising channel as the price approaches resistance. The price could move lower off resistance but remain in the rising channel. 

I will be watching the 1.5550 region to see if a consolidation develops. A downside breakout of that consolidation would trigger a short trade. A stop loss goes above the consolidation. If the price continues running higher, there is no trade at this time.

Consider the reward:risk you are willing to hold for. The first target is 1.5430 just above the recent swing low. The next target is the bottom of the rising channel at 1.5350. The next is 1.5250, followed by 1.51 which is just above a series of swing lows.

A bigger profit target isn't the only way to achieve high reward:risk trades. It can also be done by dropping down to a lower time frame, like a 5 or 15-minute chart, to determine the entry and stop loss. The small stop loss also increases the reward:risk.

Not all consolidation breakouts are clean. Sometimes there is a false breakout of the consolidation. Quite often I opt to wait for this to happen. An example occurred on the hourly chart on July 14 and 15. The price had moved slightly above resistance and then consolidated and broke lower. This was a valid short. The following day, the price moved above the prior consolidation, stopping people out, and then it dropped again. I call this the double pump reversal.

EURCAD double-pump false breakout near resistance July 17 2020

This is common. Decide in your trading plan if you will wait for this happen and then enter. The downside is some trades will be missed when it doesn't happen.

Cory Mitchell, CMT

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.

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