AUDCAD: Retests top of medium term bearish resistance line
The daily candle chart below shows AUDCAD testing a medium term bearish resistance line (point 1 on chart) after finding support on a long term bearish support line (point 6) before following up a short term bullish support line (point 5) which enabled it to also break above a short term bearish resistance line (point 2) in the previous candle.
In the current daily session the AUDCAD reversed at the high coinciding on the medium term resistance line (point 1) which it has failed again to break above as of yet - and currently trading near .9608 as of publication. Although the current very short term trend of the past four trading days has been bullish, if this resistance line (point1) cannot be overcome, then either a steep bearish continuation (point 3) may occur or a less aggressive reversal such as those observed in recent history (point 4).
Although the trend is overall bearish in the medium term and short term, the very-short term bullish momentum could indeed enable AUDCAD to break above the medium term bearish line (point 1) if its current bullish trend line (point 5) continues. The medium term bearish resistance line, among others were discussed in a previous article on the AUDCAD pair in late June 2013:
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .9675 with a Limit to take profit @ .9733 and a stop-loss @ .9622 Risk/Reward Summary: Limit risk = + 58 pips profit / (- 53) Stop-loss risk = Gain to Loss ratio = 1.09
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .9534 with a Limit to take profit @ .9411 and a stop-loss @ .9655 Risk/Reward Summary: Limit risk = + 123 pips profit / (- 121 ) Stop-loss risk = Gain to Loss Ratio = 1.02