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High probability setups: AUDJPY report card, NZDUSD progress report

This is follow-up on AUDJPY and NZDUSD high probability setups reported previously here and here. In both setups, I follow a 5-feature reversal plan previously published here.

They are:

  1. Roadmap
  2. Resistance
  3. Chart pattern
  4. Candlestick pattern
  5. Confirmation break

 

AUDJPY high probability reversal confirmed

Before

In the AUDJPY story published on 25 January 2018, I spotted a high probability reversal setup in AUDJPY with 3 features 1) roadmap, 2) resistance and 3) chart pattern.

In the higher time frame, there was a strong recurring resistance that went back as far as 2009. There was also an rising wedge that had reversal implications.

AUDJPY monthly chart from Oct 2009 to present

AUDJPY monthly chart from Oct 2009 to present

In the daily time frame, there was a potential head and shoulders bearish reversal pending the appearance of a right shoulder.

AUDJPY weekly chart Mar 2016 to present

AUDJPY weekly chart Mar 2016 to present

 

After

  1. Price resisted by overhead resistance confirmed by price action.
  2. Big Evening Doji Star on monthly chart – this is the 4th price feature ‘candlestick pattern‘ in the 5-feature reversal plan.
  3. Rising wedge trend line broken – this provides the ‘confirmation break‘ which is the 5th and final price feature to look out for.
AUDJPY action following high probability reversal pattern

AUDJPY action following high probability reversal pattern

As an extra confirmation (make it two), the potential head and shoulders in the daily chart that we spotted was also confirmed by a double-topped right shoulder.

AUDJPY head and shoulders chart pattern confirmed with double-topped right shoulder

AUDJPY head and shoulders chart pattern confirmed with double-topped right shoulder

 

Where is potential support?

Look out for the previous support at 74-74.50~. This is also a big level not to mention the left-right symmetry of price action. If you can’t see this symmetry, look at monthly time frame with a vertical dashed line on 01 January 2014. If you fold this chart into two halves along the vertical line, you will be able to spot the left-right symmetry.

 

NZDUSD high probability reversal in good progress

Before

On 15 March last week, I reported a high probability setup in the NZDUSD. The same elements in my 5-feature plan was visible especially the very long significant resistance followed by a potential head and shoulders. This was the chart taken last week.

High probability reversal chart pattern on NZDUSD weekly chart from mid-July 2015 to present

High probability reversal chart pattern on NZDUSD weekly chart from mid-July 2015 to present | Source: MT4

 

After

These two charts were captured moments ago. The high probability setup I spotted in NZDUSD got a little further.  A full head and shoulders reversal is fully visible on the daily time frame. On the weekly time frame, we also hav a Bearish Engulfing Candle as an additional high-probability reversal feature.

NZDUSD weekly chart with head and shoulders

NZDUSD weekly chart with head and shoulders

However I can’t see with full confidence that the high probability setup is confirmed because a last feature which is confirmation break is missing. I like to draw my neckline on line charts but there are two time frames involved in this observation. Based on a neckline in the weekly chart, price is already below neckline so reversal pattern is confirmed. Based on a neckline in the daily, price is perched right on the neckline.

Whether one sees a valid trade or not depends now on individual preference. There is never 100% certainty so even the best setup with the most number of reinforcing factors can fail. Therefore what matters now for each trader is to see this as clearly a setup of risk-reward proposition. The faster the entry, the less certainty. The more confirmations observed, the lousier the entry price. Good luck.

NZDUSD daily chart with head and shoulders perched on neckline

NZDUSD daily chart with head and shoulders perched on neckline

 

Where is potential support?

On the daily chart, price is sitting on support right now. If price breaks down with full confirmation of reversal, major potential support is previous support at 68-69 region – a zone in place since 2016.

Director, TerraSeeds Market Technician Pte Ltd. Trader, investor. @sohtionghum was picked ‘Top 70 Forex Twitter in 2015’. Operates multiple strategies.

“Dear reader, I do not have a financial license to give advice. I do not know you the reader. Your financial objective and risk tolerance may be different from mine. I am not responsible for any consequence of your action.

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