AUDCAD Breakout Trap Rejection Candle Produces 5 Day Sell Off

Today I would like to review a setup which was shared in our War Room ‘Chart of the Day’ section. The AUDCAD produced a long wick rejection candle which demonstrated a bullish breakout trap as the market tried to rally past resistance.

Looks like a longer term classic bearish head and shoulders pattern forming on the AUDCAD. Last trading session, price tried to move past a resistance level but couldn’t maintain the higher prices. Price sold off and closed back underneath the resistance level, creating a false break and a bearish rejection candle.

This market is starting to look very top heavy and could be the beginnings of a transition into a bearish trend. The rejection candle is starting to complete the head and shoulders pattern and we could see nice bearish follow through from this classic bearish chart pattern.

How things played out…

During the last two months the market has been very indecisive. Lot’s of nasty consolidation, violent whipping up and down off the back of news releases and plenty of breakout traps. This setup on the AUDCAD was a refreshing change. We were able to use this breakout trap to our advantage as the setup clearly demonstrated rejection of higher prices from a proven resistance level.

The market responded very well to the setup and sold off almost immediately. The bearish price action was so aggressive the market continued to sell off for the next 5 days straight. I was unable to catch this move because the setup did not meet my trade entry conditions. Many War Room traders did manage to catch this move using our breakout entry method in combinations with our split money management system. Big shout out to war room trader “Syed” who nailed this trade.

Let me know if you managed to catch this move.

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