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We have a lot of great setups and potential setups to watch in the week ahead. One pattern I’m keeping a close eye on this week is the wedge pattern that began forming late last month on USDCAD.
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I’m hesitant to treat this as a bullish continuation pattern given the massive rally this pair has seen, climbing more than 2,000 pips since July of last year. This gives me reason to believe that this wedge could be a continuation pattern just as easily as it could signal a reversal.
The beauty of playing a wedge like this is that you don’t commit to a position until the market gives you confirmation. This helps to keep our trading capital safe and also provides us with a great area to place our stops.
A break to the downside would give us a measured objective of 1.2000 while a break to the upside would target the 1.3000 area. Either way we have a nice 400 pip area to work with.
Summary: Wait for a 4 hour close below wedge support or above wedge resistance and then watch for a retest of the broken level to trigger an entry. Downside target is 1.2000 while an upside break would target the 1.3000 area.
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Tuesday, October 23, 2018