AUDCAD: Trading the recent bearish price action
The chart shows a bearish trend in AUDCAD as it has re-entered an Andrew’s Pitchfork channel (point 1 on chart) where it has currently broken a long term bearish support line (point 2 on chart) which also coincides around .9500 a long term horizontal support and resistance level (has been both).
The trend is bearish overall, especially considering the convergence of short, medium and long term resistance lines (point 4 and 5) coupled with recent bearish price action and lack of apparent support other than the long term bearish support line (again point 2) which failed to hold current prices despite providing support for yesterdays bearish close (previous daily candle).
Therefore, unless support can be maintained at .9000 and the long term bearish trend line regained (point 2) to provide a bullish reversal in the trend, a bearish continuation (point 3) with possible support closer to the median line of the pitchfork channel (point 1) may be the next place AUDCAD looks for support.
Below are examples of how to trade a bearish continuation if the trend continues or a bullish reversal if the trend reverses and bullish support lines can be regained.
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @.9566 with a Limit to take profit @ .9650 and a stop-loss to cut losses @ .9476 Risk/Reward Summary: Limit risk = +84 pips profit / (-90) Stop-loss risk = Gain to Loss ratio = 0.93
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .9466, with a Limit to take profit @ .9366 and a stop-loss to cut losses @ .9565 Risk/Reward Summary: Limit risk = +100 pips profit / (-99) Stop-loss risk = Gain to Loss Ratio = 1.01