Our winning patterns for week ending 2020-12-04
Broadening ascending wedge
GBPUSD Broadening Ascending Wedge on the 1H chart. Here we trade inside wedge waiting for confirmation from S-V3 oscillator. We see that pattern develops as expected, forming higher highs and lower lows. There are already three touches of bottom trendline and 3rd touch of top edge just happening. Setting TP halfway between top and bottom is a safe position as after last top touch price can create partial drop and go back to top and breakout upwards. Strong signal from S-V3 indicator leave no doubt – price drop is coming. Second image shows moment of hesitation but without attempted breakout. Few hours later GBP heavily dropped.
USDCHF Pullback on the 1H chart. This is a tough pair to trade, but with a good setup can be easy. We can see USD trending down for a long time in some sort of broadening channel. When after almost a month USDCHF broke out downwards we were expecting pullback, as that would be too easy to let sellers take total control over the price direction. Pullback happened, and we got explicit confirmation from S-V3 that this move is valid. Lower timeframe line is well above higher timeframe line, creating a massive gap. Price paused for a moment under bottom trendline and after a few hours dropped dramatically closing our trade.
Failed broadening ascending wedge
USDJPY failed wedge on the 1H chart. Sometimes it is profitable to trade busted patterns. Here is an excellent example. We see that this wedge will most probably won make another touch of top trendline. It would have to be a gigantic boost from buyers of USD. For us it is important information as now we know where to place TP. Bottom trendline of busted wedge gives us another clue where to expect bottom. Confirmation from S-V3 indicator signals sellers exhaustion. If You want more confirmation, please notice divergence on S-V3 few hours before hitting trendline. Knowing this info, we opened BUY position.
Rising wedge and Resistance
EURUSD Resistance on the 1H chart. EUR was climbing up for a very long time. Trading against trend would be very risky here. There is a strong uptrend and two rising wedges. Those patterns are not reliable and can be tricky to trade. See image two below – first wedge breaks out upward, but soon after price drops suddenly. Then you have second wedge which is steep, break out downward and pulls back forming double top with resistance. If you took this trade, this was hard earned 300 pips.