EURAUD: Pullback within medium term bullish trend after short term support fails
The daily candle chart below shows EURAUD failing to hold along a very short term bullish support line (point 1 on chart) in the current session (trading near 1.4878 as of publication) and poised to repeat down a short term bearish resistance line ( point 3) or less aggressive resistance line (point 4) unless the short term bullish support line (point 1) can be regained where static resistance may be targeted around 1.5030 and 1.5200.
Although the long term bearish resistance line (point 6) was overcome in early July 2013, it seems to have caused the medium bullish support line (point 5) to shift lower after a break out to the downside which was discussed in a previous article including the overall trend.
The trend still appears strongly bullish over the medium term and the medium term bullish support line (point 5) and the upper resistance line of the medium term bullish channel (point 2) may both provide support if there is a genuine pullback. Therefore any short term pullback may be followed by a higher move both with the above targets.
Below are examples of how to trade a bullish continuation or a bearish reversal.
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.5001 with a Limit to take profit @ 1.5200 and a stop-loss to cut losses @ 1.4930 Risk/Reward Summary: Limit risk = +199 pips profit / (-71) Stop-loss risk = Gain to Loss ratio = 2.80
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.4851 with a Limit to take profit @ 1.4723 and a stop-loss to cut losses @ 1.4920 Risk/Reward Summary: Limit risk = +128 pips profit / (-79) Stop-loss risk = Gain to Loss Ratio = 1.62
Daily candle Chart: