The daily candle chart below shows NZDUSD trading near session highs for the day coinciding near the resistance line of the medium term bearish channel (point 1 on chart). The pair had an upside breakout of this channel as noted in a previous article along with other short term features of the trend that came to fruition (point 2 and point 3) since then.
Although another breakout above the resistance line where NZDUSD is currently trading near .7912 (as of publication) may be considered bullish – it may still support a descent again– unless the long term bullish support line (point 5 which is set to intersect by mid august) can reverse the bearish momentum. If a breakout doesn't occur, then a continuation in the short term bearish channel (point 2) may ensue and If the long term bullish line fails, static support may be found near .7679 (point 4).
If the bullish momentum of the past 3 candles continues, then an attempt to regain the very short term bullish channel (point 3) may follow.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .7920 with a Limit to take profit @ .8098 and a stop-loss @ .7860 Risk/Reward Summary: Limit risk = +178 pips profit / (-60) Stop-loss risk =Gain to Loss ratio = 2.97
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .7835 with a Limit to take profit @ .7739 and a stop-loss @ .7899 Risk/Reward Summary: Limit risk = +96 pips profit / (- 64) Stop-loss risk =Gain to Loss Ratio = 1.50