The holidays are definitly over now as the market springs back into action. The AUDCAD daily chart is in our sights today as a nice price action setup has formed with a few variables that can be used to build value into the trade setup.
Firstly, the market has just rallied straight upwards for the last few weeks creating a gap between its mean value. This presents the chance to catch a good mean reversion move as there is a good chance the market will correct back downwards.
Secondly, a price action signal has formed – the bearish rejection candle, and it’s demonstrating rejection of a proven resistance level. Combining these 3 factors we can assess this as a low risk, high reward trade opportunity. Some war room traders have already taken advantage of the retracement entry option here. A good, logical target level would be the obvious support below providing plenty of room to achieve good risk/reward..
Trade Update
We’re back to re-cap over the trade setup that formed last week on the AUDCAD daily chart. As expected there was an aggressive mean reversion as price came off the resistance level, where our rejection candle setup occured.
We did have our target right on the previous support level, but unfortunately it wasn’t hit. Price started to find buoyancy just above the level. We were waiting for the market to take us out naturally at our price target but now a counter-trade bullish rejection candle has formed off the support level. This to us is consistered a ‘yellow flag’ warning sign that the market may pick up from here so we’ve decided to take profit at the end of day close. We did miss out on the 1:5 target, but managed to grab 1:4, which is above our minimum target of 1:3 risk/reward anyway.
When confluent setups like this occur it’s hard to ignore them, especially when there is that larger gap between the mean value and price. If you would like to learn how to apply mean value analysis to price action trading then you may be interested in our war room trader membership, which includes our price action course that covers our strategies in full detail.
Until next time, all the best with your trading.