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Forex: Ideas You Can Trade - USDCAD Opens Under Converging Support

Posted by Steven Hatzakis on Aug 26, 2013 12:15:00 PM

USD/CAD - Short term bearish development unless medium term support lines regained:

The medium term daily candle chart below shows the USDCAD pair ascending a short term bullish support channel (point 2 on chart) which it has failed upon in the current session and also opened below both medium term bullish support (point 4) and medium term bullish resistance (point 6) and hovering just above 1.0500 as of publication (near 1.0510). The coincidence of these three bullish lines failing could be deemed a "Bearish Trifecta".

If the developing short term bearish resistance line (point 1) can be overcome and both support lines (point 4 & point 6) regained, then the short term bullish channel - if also regained - could provide a continuation with a target of the 100% Fibonacci level (point 7) or previous high of the overall chart (near 1.0600) in the very short term. Additional support may be also be targeted higher near 108.35 intersecting with the long term bullish resistance line (point 3). A less aggressive bullish continuation could also follow if the short term bullish channel (point 2) cannot be regained with support following on the medium term bullish line (point 4) and medium term bullish resistance (point 6) - the latter of which could now act as support.

A failure to find support on both medium term bullish lines could enable a bearish continuation on the developing short term bearish resistance line (point 1) especially if the short term bullish channel (point 2) cannot be regained. If this happens, a target near the 61.8% Fibonacci level intersecting near a newly developed medium term bullish support line (point 8) could occur near 1.0400 - around the beginning of September 2013. The medium term trend still looks bullish, although a short term pullback could occur as discussed in a previous article on the pair in late July 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” @ 1.0521 with a Limit to take profit @ 1.0559 and a stop-loss @ 1.0499 Risk/Reward Summary: Limit risk = +38 pips profit / (-22) Stop-loss risk = Gain to Loss ratio = 1.72  

2.  BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.0491 with a Limit to take profit @  1.0465 and a stop-loss @ 1.0515 Risk/Reward Summary: Limit risk = +26 pips profit / (-24) Stop-loss risk = Gain to Loss Ratio =  1.08

Medium term daily candles:

 usdcaddaily august 26 2013 note

 

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