For those who have the Scandinavian pairs on your radar, there’s a potential reversal trade on USDNOK thanks to the rejection of yesterday’s bearish pin bar reversal on a soft level of support, which could represent the lower high of a double top formation. The “lower high” coincides with a 0.618 Fibonacci retracement level too which is common before the resumption of a long-term move.
_20140718100552.jpg "USDNOK Daily")
If price pushes down to 6.1470 and does form a subsequent double top or “m” shaped formation, the 6.1470 level will represent the neckline of this newly created formation. IF and when the neckline breaks (this level), this could become part of a bigger-picture where price simply trickles down to the bottom of the range.
Our entry, selling the low of yesterday’s bearish pin bar reversal essentially gives us “early” entry in anticipation of the formation of a bearish reversal pattern. This gives us a far more efficient entry compared to if we were to simply sell the break of the neckline (and thus, have a huge stop!)
From a fundamental perspective, interest rates in Norway are 1.5% whereas, in the US, they stand at 0.25% - giving us another clue that people will be far more likely to sell the USD and buy the Norwegian Krone at this price efficient level than at any other price since May.
Many traders will not trade this because it is a reversal, and 80% of reversals fail. However, the reward to risk potential for those who do trade reversals certainly stacks up!
By for those who buy the argument in selling this currency pair, many will simply sell the bottom of yesterday’s bearish pin bar reversal’s low (minus spread and an additional pip, with a stoploss above Wednesday’s high, plus spread and that additional pip)
If price pushes down to 6.1470 and does form a subsequent double top or “m” shaped formation, the 6.1470 level will represent the neckline of this newly created formation. IF and when the neckline breaks (this level), this could become part of a bigger-picture where price simply trickles down to the bottom of the range.
Our entry, selling the low of yesterday’s bearish pin bar reversal essentially gives us “early” entry in anticipation of the formation of a bearish reversal pattern. This gives us a far more efficient entry compared to if we were to simply sell the break of the neckline (and thus, have a huge stop!)
From a fundamental perspective, interest rates in Norway are 1.5% whereas, in the US, they stand at 0.25% - giving us another clue that people will be far more likely to sell the USD and buy the Norwegian Krone at this price efficient level than at any other price since May.
Many traders will not trade this because it is a reversal, and 80% of reversals fail. However, the reward to risk potential for those who do trade reversals certainly stacks up!
By for those who buy the argument in selling this currency pair, many will simply sell the bottom of yesterday’s bearish pin bar reversal’s low (minus spread and an additional pip, with a stoploss above Wednesday’s high, plus spread and that additional pip)
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