Another bearish chance for a bigger drop has been wasted. Yesterday, sellers were hoping for a bigger slide on global indices, coming from the bearish breakout from the good-looking symmetric triangle pattern. Hopes faded at the end of the European session and the beginning of the American one, when the DAX and SP500 surged back inside the triangle. In theory, that leaves us with a false bearish breakout, which is usually considered a strong signal in the opposite direction, so in our case – north.
Let’s start with the SP500. You can clearly see the false breakout here and then a nice pullback above the lower line of the triangle. The European session however, didn’t start well and it’s negatively affecting futures on the SP500. The price is correcting the bullish movement from yesterday and is testing the lower line of the triangle again but this time from above. Long story short, as long as the price stays above the lower line of the triangle, sentiment is positive.
Short update about the EURUSD, which is currently forming a flag formation. The flag is a trend continuation pattern, which in this case promotes further rise. In the past few days, the price was making higher lows, supported by the blue up trendline. This may indicate a willingness for a bigger upswing. In the mid-term, as long as the price stays inside the flag, buyers can still have hope for a bigger upswing.
When mentioning the Euro, we have to talk about the EURCAD, which is ahead of a bigger movement. The thing is we don’t know the direction yet. After the flag patten, the price created a rectangle formation. So, simply speaking, the price is currently in a tight range. The way price action enthusiast trade this is by buying when the price breaks the upper line of this pattern and selling when the price breaks its lower line.
Trading FX/CFDs on margin bears a high level of risk, and may not be suitable for all investors. Before deciding to trade FX/CFDs you should carefully consider your investment objectives, level of experience, and risk appetite. You can sustain significant loss.