USD/CAD Drop to 1.35000? This is An Optimal Short Setup!
USD/CAD is forming a Head and Shoulders reversal pattern, potentially signaling the end of this bull channel. The price action has begun to stall and oscillate around the 1.37000 level and is now falling below the 200EMA. We are now faced with a reversal signal in a bull channel.
How do we trade this?
The probability of profit is greater longing in a bull channel because there are more bull bars than bear bars. We are faced with a potential reversal pattern, the head and shoulders, which negates our bias to long. Should we short?
If you're looking to swing trade, yes! Swing trading involves lower win rates because you're trading the reversal of a pattern. In other words, you bet against the trend, which means your probability of profit is low, but your reward is *much* higher as a result.
A decent short here would have been to enter around 1.38000. Since that price is behind us, I would short here and set a protective stop loss above the right shoulder at 1.38000, take profit with half your position just below the bull channel at 1.36000, and the rest just above the 200EMA at 1.35300. Once the first take profit is hit, move your stop up to the entry price or just above it to lock in profits.
Key Points
1. Bull Channel with a reversal pattern.
2. Potential Head and Shoulders Forming.
3. Gap down to 200EMA, reasonable profit target.
4. RSI has Room to Fall
You are solely responsible for your trades, trade at your own risk!
Let us know what you think in the comment section below!
How do we trade this?
The probability of profit is greater longing in a bull channel because there are more bull bars than bear bars. We are faced with a potential reversal pattern, the head and shoulders, which negates our bias to long. Should we short?
If you're looking to swing trade, yes! Swing trading involves lower win rates because you're trading the reversal of a pattern. In other words, you bet against the trend, which means your probability of profit is low, but your reward is *much* higher as a result.
A decent short here would have been to enter around 1.38000. Since that price is behind us, I would short here and set a protective stop loss above the right shoulder at 1.38000, take profit with half your position just below the bull channel at 1.36000, and the rest just above the 200EMA at 1.35300. Once the first take profit is hit, move your stop up to the entry price or just above it to lock in profits.
Key Points
1. Bull Channel with a reversal pattern.
2. Potential Head and Shoulders Forming.
3. Gap down to 200EMA, reasonable profit target.
4. RSI has Room to Fall
You are solely responsible for your trades, trade at your own risk!
Let us know what you think in the comment section below!
-Joe Dean
Trader Engineering Course
**Available Now at TraderEngineering.com**
Trader Engineering Course
**Available Now at TraderEngineering.com**
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