The Forex Chronicles

Descending Triangle on Bitcoin – September 2019

by Leave a Comment

Bitcoin Price Action

Bitcoin has had a pretty crazy ride over the last few years. After surging higher to around $20,000, the price subsequently dropped all the way back to around $3150, and is now sitting somewhere in the middle of these two extremes at around $10,200.

If you look at the daily price chart of this particular cryptocurrency, you can see that there is a real air of uncertainty surrounding it right now:

Bitcoin Descending Triangle - September 2019

You can see from the trendlines marking the high and the low points that the price has been trading in a descending triangle in recent months, which basically means that it has been trading in an ever decreasing trading range.

The significance of this is that when the price of Bitcoin eventually breaks out of this descending triangle, which it has to do at some point, there is likely to be a strong breakout either upwards or downwards.

Breakout Price Targets

If there is to be an upward breakout, the price of Bitcoin is going to need to move strongly above $10,600, and close decisively above the upper trendline.

Similarly, if there is to be a downward breakout, the price is probably going to need to close below $9500 based on the current trendline level.

With regards to price targets, it is almost impossible to predict how far the price of Bitcoin could go, regardless of which direction the breakout is.

You would think that $8000 would be easily within range if there is a downward breakout, while the price could easily test the previous highs of 2019, and possibly push on even further to $15,000 and beyond if there is an upward breakout.

Final Thoughts

The point is that although Bitcoin seems to be fairly dead right now in terms of daily price movements, it could soon kick into life if the price breaks out of this descending triangle.

You can be sure that many traders and analysts are aware of this triangle and are eagerly anticipating a possible breakout, and so when there is a big price move in either direction, there is likely to be a lot of momentum behind any breakout.

I myself am not really a trader of cryptocurrencies, but I just thought I would alert people to this particular trading pattern because these descending triangle breakouts can be very profitable when they occur.

Please remember that Bitcoin and other cryptocurrencies are highly speculative instruments, and it is possible to lose all of your capital.

Double Pin Bar on USD/CAD at Start of September

by Leave a Comment

Introduction to Pin Bars

I was listening to a podcast over the weekend and one of the traders being interviewed said that despite having about three core strategies that she likes to use, it is the simple pin bar that often provides her with the best signals.

To remind you, a pin bar is essentially where you have a long candlestick with a very small body, and when you get these pin bars towards the end of an upward or downward trend, it often signals that the trend is running out of momentum and likely to reverse.

One pin bar by itself often provides a very good trend reversal signal, but when you get two pin bars together, it is often a very strong signal that the trend is coming to an end.

Real-Life Example From USD/CAD Pair

I was reminded of this just recently when I was looking at the daily chart of the USD/CAD pair. As you can see below, the price has been recovering strongly since the middle of July, and has recently crossed above the 200-day moving average:

USDCAD Double Pin Bar - September 2019

More significantly, it also threatened to break even higher last week after being stuck in quite a narrow trading range for a number of weeks, but after posting two new highs on consecutive days, the price fell back down on both occasions and ended up forming a pin bar on both days.

Trading Opportunity

As a result of this double pin bar formation, there was a good opportunity to place an order to open a short position a few pips below the lowest point of these two pin bars at around 1.3310 to catch any reversal, and as it turned out, this would have been a very profitable trade.

At the time of writing, the USD/CAD is trading at around 1.3150, which equates to around 160 points profit if you had entered a short position just below the lowest point of the two pin bars.

Final Thoughts

The point of this article was not simply to highlight a profitable set-up that you might have missed. It was to demonstrate how profitable these double pin bar set-ups can be when they actually occur.

Unfortunately they don’t tend to occur very often, so you won’t necessarily be able to trade these high-probability set-ups several times a month, for example, but it is worth keeping an eye out for them, particularly on the longer time frames when the odds of success are so much higher.

What I like about pin bars, and double pin bars in particular, is that there is an obvious place to place your stop loss – a few pips above the highest point of the two pin bars, as in this case, or a few pips below the lowest point in a downward trend.

The difficult part is trying to work out where you should take profits because sometimes you can get a large reversal, as was the case here with the USD/CAD pair, whereas other times the price may only move 10-20 pips before consolidating in the previous trading range or continuing its previous trend.

Therefore it could be argued that the best pin bar strategy is to close half the position for a small profit and let the other half run for as long as possible, but everyone will have their own methods of trading these high-probability set-ups. Ultimately you just have to find a strategy that works for you.

GBP/USD Analysis August 2019 – Key Levels to Watch

by Leave a Comment

Recent Price Action

The British pound has slumped against many of the major forex pairs as the threat of the UK leaving the European Union without a deal has only increased with every passing day.

However looking at the price charts of many of the pound pairs, the price does seem to have stabilized around the current levels, and may even be showing signs of bottoming out.

So in this article I thought I would take a closer look at the GBP/USD pair in particular because this has really fallen quite substantially in recent months, and have attempted to identify some key levels that may be worth watching in the coming days and weeks.

Key Levels on Daily Chart

Looking at the daily chart first of all, the price is currently trading a long way below it’s 200-day moving average, so there is plenty of scope for the price to rise and move back towards this key level.

The 200-day EMA currently stands at 1.2731 at the time of writing, but if there is to be an upward breakout, we really need to see the price close above 1.2327 because this is the current level of the Supertrend indicator, which has been indicating a bearish trend since 15 May 2019.

GBPUSD Daily Chart August 2019

Until that happens, the price is likely to continue trading in a narrow range between 1.20 and 1.22 until the whole Brexit situation is a lot clearer.

Key Levels on Weekly Chart

Moving on to the weekly chart, the price is also a long way below the Supertrend indicator, which has also been bearish since May, and currently stands at 1.2705.

So I think if we are to see a longer-term bullish trend on the GBP/USD the price is going to have to close above this level because this is currently acting as a strong resistance level, and realistically this is unlikely to happen any time soon.

The only likelihood of the GBP/USD closing above 1.2705 on a weekly basis is if there is some kind of agreement in place between the UK and the EU, but as I say, this is highly unlikely at the present time.

GBPUSD Weekly Chart August 2019

Final Thoughts

I think a lot of traders are keen to look for possible long positions on the GBP/USD pair simply because it has fallen so much this year, but it is pointless taking a position based on a dead cat bounce, or speculating that an agreement will be reached.

It is better to either wait for some news regarding a Brexit agreement, or if you do insist on trading, watching some of the key levels mentioned above to see if they are breached.

However my personal view is that it is not worth getting involved with any medium to long-term trades on this or any other British pound pair until after the October 31 deadline, or until an agreement is reached, whichever happens sooner.

I think the GBP may well bounce back in time even if the UK crashes out without a deal, but at the moment the GBP/USD is simply too risky to trade with any real certainty.

AUD/USD Analysis August 2019 – Long-Term Breakout Confirmed

by Leave a Comment

Previous Trading Range

If you read my previous blog post that I wrote about the AUD/USD pair last month, you will know that I talked about a potential long-term breakout that could be about to take place on this particular currency pair. Here is the original price chart:

AUDUSD Long Term Downward Trend 2019

The price had been trading within a clearly defined trading range for the whole of 2019, and so it seemed like it was only a matter of time before the price broke strongly upwards or downwards out of this range.

July / August Breakout

I actually thought that we would eventually see an upward breakout, but as you can see from the daily price chart below, the price actually broke lower, and more importantly, closed below the lower trendline on the last month of July.

AUDUSD Breakout July August 2019

Subsequently, the momentum of this breakout helped to drive the price lower into August, hitting a low of around 0.6677 on 7 August before bouncing back.

I said in my previous blog post that I think the price may find support at the previous low, which was caused by the flash crash back in January, and this proved to be correct because although the price did go slightly lower than this on an intraday basis on 7 August, it soon found strong support at this level and bounced back towards 0.68.

Future Direction

After finding support at the previous low, it is hard to argue that the price of the AUD/USD is likely to continue falling much more.

This is a long established downward trend, but after the previous breakout and the subsequent rebound, it is starting to look like it is close to the bottom now.

Therefore I would say that in the near future at least, the price is likely to move back towards its 200-day moving average, which is currently just above the 0.70 level, and back into its previous trading range.

After that, the previous downward trend could prevail and the price could easily fall again, or we could finally see the start of a new upward trend, but for that to happen we really need to see the price close strongly above the 200-day exponential moving average.

If the short-term moving averages cross above this indicator as well, then there could well be a longer sustained upward move in the future.

Final Thoughts

The point I wanted to make is that it can be very profitable to wait for these breakouts to occur, particularly when a pair has been trading in a clearly defined trend for many months, as was the case here.

In this instance you could have banked up to 172 points if you had entered a short position at the close of the breakout candle and closed at the lowest point on 7 August.

Of course the hard part is deciding when to close because it is virtually impossible to get out at just the right time, but there were still plenty of opportunities to make money because you could have set your price target at 50, 100 or 150 points, for instance, which were all realistic targets, or closed incrementally as the price continued to fall.

These breakouts require a lot of patience because the price may be stuck in a trading range for many months, but when they occur, they can be very rewarding.

AUD/USD Analysis July 2019 – Poised For Long-Term Breakout

by Leave a Comment

Previous Price Action

The AUD/USD pair has been very interesting to watch in the last few weeks because it is getting closer and closer to a significant breakout all the time.

If you look at the daily chart of the AUD/USD pair below, you can see that it has been stuck in a long-term downward trend for many months now, and recently bounced back downwards after hitting the upper trendline, demonstrating the strength and significance of this trend.

AUDUSD Long Term Downward Trend 2019

The lower trendline of this trend is not so strong because the first low was caused by a flash crash and quickly recovered, but many long-term traders will still consider this as a low point, and will plot the lower trendline accordingly, as shown above.

Future Breakout

You will notice that these trendlines are converging more and more every day, and because the price is still refusing to break upwards or downwards out of these support and resistance levels, the breakout is likely to be quite a big one when it does finally occur.

Indeed the longer the price stays within the confines of a long-term trend, the stronger the breakout tends to be in general.

Ideally I think many traders would like to see an upward breakout because there is far greater potential for the price to move several hundred pips in this direction.

If it were to break out of the upper trendline and close strongly above this trendline, the price of the AUD/USD pair is likely to move above the highly significant 200-day exponential moving average, which would also encourage traders to open long positions and help to drive the price higher.

If it were to break lower, however, I think the price would struggle to break below the low of the flash crash that occurred at the start of the year.

For that reason, I think a better play would be and wait and see if the lower trendline acts as support if the price continues to fall because if it does and the price appears to be reversing back upwards again, a long position would be a decent high probability trade, and could lead to more profits it is then goes on to break through the upper trendline.

Regardless, it should be interesting to watch the future price movements of the AUD/USD pair in the next few weeks to see where it goes, and to see if there is going to be a significant breakout in either direction.

As always, the content of this article does not represent trading or financial advice. It is just my own personal thoughts and opinions. You should always do your own analysis and make your own decisions before entering any trades.