Last week was yet another illustration on how important price confirmation is.
To recap what we discussed in Week 20 about the EURJPY, we stated that the double bottom would only be confirmed if price closed above the neck line (Yellow line). Well, price flirted with neck line but failed to break through it. What happened then? True enough, at the start of Week 21, EURJPY continued its downward trend.
Students of tflow® at Terraseeds were well prepared for this scenario and were able to pocket a neat profit. [See posting on Week 21: 145 pips in 2hr 45mins!]
So, Week 21 saw yet another new low for EURJPY in 2010.
However, an interesting scenario that was similar and yet not similar to the previous week (Week 20), took place in Week 21. What do we see on the H4 chart? Another double bottom!
EURJPY displays double bottom in Week 21
This time round, the double bottom was confirmed with the break of the neck line (White line) and price rose thereafter. You guessed it again! Students of tflow® at Terraseeds were quick enough to recognise this reversal and joined in the ride up! Towards the end of the week, news coming out of the Eurozone (Spain) pulled the breaks on this mini revival.
So question on everyone’s mind is: Is this trend reversal following the double bottom sustainable? Here is what we can look forward to, going into Week 22.
- Continuation of the recent trend reversal (blue arrow) is only confirmed when the neckline support of the double bottom is broken (white neckline). A potential immediate resistance level would be the high of Week 21 at 113.67.
- Resumption of the overall downtrend (red arrow) will take place if the white neckline proves to be a weak support. In this case, the lows of Week 21 (Lime parellel lines) could serve as a potential support levels. Or perhaps, yet another new low for 2010 would be reached. Would you bet against it?
I said it at the start; I will say it at the end. Price confirmation is key! Let the market show us the way…
