Elements of high probability reversal setup appear in NZDUSD
2 out of 5 high probability reversal setups appear in NZDUSD chart. This chart suggests a potential short should price get resisted one more time. Two more features to look out for are the right candlestick pattern and a confirmation break.
In this piece ‘5 price features that set up a good reversal trade‘, I observed that high probability reversals have 5 common elements:
- Chart pattern
- Candlestick pattern
- Confirmation break
2 significant features in NZDUSD weekly chart from mid-2015 to preset
In this NZDUSD chart, a strong previous resistance since mid-June and potential head and shoulders reversal pattern are now visible. The previous resistance is significant because of its long duration since mid-2016. This resistance was also tested and confirmed again recently. At the moment, the chart pattern resembles more of a continuation channel but another test-and-resist at the overhead zone will change it into a potential head and shoulders.
Spotting reversals according to 5 charts features have quite high probability results. High probability is not equal to 100% so there are failures. For traders who want high level of assurance, wait for all features to appear. It is all about entry level. Early entrants encounter more uncertainty but have better reward-risk proposition since entry price is better. Late entrant get a worse price but have a better justified entry.
This is a recent high probability trade on AUDJPY short that worked very well using this same technique.