In this chart we spoke about the AUDUSD holding on a strong daily support level.
We can see the market tested this level multiple times in the last few months and was defended aggressively by buyers.
A large ‘thick body’ bullish rejection candle buy signal formed off the support level – signalling to the trader, support was holding again with strong intent to move upwards.
Generally the thicker body rejection candles which close in favor of the signal’s direction have a better chance to work out, and better price follow-through.
The rejection candle “buy signal” followed through nicely off support and produced a very strong rally.
The market moved so far away from the mean, that it created some mean reversion opportunities. Note the circled bearish rejection candles which were the framework to build mean reversion trades off.
These mean reversion corrections can get quite violent and produce fast outcomes. Note the second mean reversion caused a massive overshoot event, which caused price to sell off dramatically for weeks. This was a very lucrative trade opportunity.
On the AUDCHF daily pair, a small Indecision Doji candled formed under resistance.
We were looking for breaks of the low to catch a bearish breakout. The location of this trade was the most dominant factor here as, old critical support was acting as new resistance.
If we got a bearish breakout off this level, then it was expected to sell off to the next major support level, and re-test that area again.
The breakout did occur and we did see a nice initial sell off. However, the market didn’t move all the way down and test the target area of the major support below.
The move it produced was still ok, allowing some war room traders to just grab the set and forget 1:3 risk reward target.
After a short burst down, the bulls picked the market back higher and rallied price above the resistance level. This ended up becoming a major breakout trap – creating a large 2 candle rejection structure.
The 2 candle rejection signal was able to finally push price down to the anticipated support level.
A really nice bearish rejection candle “sell signal” formed on the AUDCAD.
This one was basically ‘text-book perfect’, forming the ideal swing trade scenario with a price action signal to back it.
The old support level was very significant here, and now it was being tested as new resistance after a strong rally. The bearish rejection candle that formed after price respected the as resistance, was very well structured in terms of its anatomy.
The closing price was bearish, creating a thick body on the candle – giving that extra bit of bearish value. The upper tail punctured the level to show that price tried to break through there, but failed – creating this ‘failed breakout’ environment.
A very nice result from this ‘picture perfect’ trade. A breakout which offered instant gratification (moves in profit and stays in profit).
The market sold off for days and made it’s way day to the anticipated target of the previous swing lows. It’s great to see such nice volatility out of price action trades, I mean this setup only took 3 days to reach it’s target – a 200 pip move.
If you would like to learn how to read charts on a price action level, and anticipate price moves like the ones shown here today – check out the War Room for Traders members area. We’re talking about this stuff every day and have a blast – while making money.
Check out some of the testimonials also, we’ve got some members leaving their jobs to become full time traders.
Good luck on the charts this week!