Cory Mitchell, CMT

The USDCAD is moving in a triangle pattern over the past few trading days. This triangle follows an upside breakout from a choppy sideways trading range.

Given the uptrend in play since June 10, the breakout direction is likely to be higher. 

The preferred entry point is near the bottom of the triangle, ideally after a false breakout to the downside.

USDCAD triangle following range breakout on hourly chart June 30 2020

Waiting for the entry serves multiple purposes:

  • We get to see if the price moves lower one more time and fails. 
  • A false breakout to the downside provides an entry and a potentially sharp move back to the upside.
  • By entering at the bottom, the trade can still be profitable even if the price stalls at the top of the triangle. 
  • By entering near the bottom, if the price breaks higher out of the triangle the reward:risk could be huge.

The downside is that waiting for the entry means it may not come if the price breaks to the uspide. Yet, if the price breaks to the upside, we can always get in on a pullback, likely near the triangle breakout point, so not a lot is missed. 

The initial profit target is 1.3770. Eventually, the 1.3825 to 1.3825 area will likely be tested again. 

The Bearish Scenario

If the price has a false breakout to the upside, then this triangle may not be ready to break yet, or that was its attempt to do so. Entering short near the top of the triangle is an option, especially following a false breakout. Then wait and see if the price can break below the triangle low. If it can, hold through the next wave down. Consider using a trailing stop loss. If the price stalls near the bottom fo the triangle, and then starts moving up, exit and consider taking the long. 

Trade Signals

Near the bottom or top of a chart pattern, I like to see the price consolidate and then break out of the consolidation. For example, near the bottom of the triangle I will be monitoring the price action to see if the price consolidates on the hourly or 15-minute chart, possibly even the five-minute chart, and then starts moving higher out of that consolidation. That is the trade trigger to get long, with a stop loss below the recent lows. 

By 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.

Comments (1)
No. 1-1

No long trade as the price went screaming through the support.

1.3610, a prior low, is a key area to watch. If the price can't gain traction below there, watch the upside. If it stays weak, there is not much support for a while.

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