CAD/CHF Price Analysis: Bulls eye long opportunity from support structure


Developing story

CAD/CHF has made an hourly bullish impulse followed by a 50% mean reversion from which the price has held and pushed higher to form a support structure, keeping the bullish trajectory intact.

Bulls can enter at support and seek a push higher on the shorter-term frames, such as the 15-min chart.

The following charts display the price action and motive for a long position for a 1:2 risk to reward day trading set-up.

Note, the criteria of the trade is to manage the position on a 15-min time frame and move stop to breakeven at the earliest opportunity (explained below).

The trading strategy has a 60% win rate, meaning risking a low percentage per trade, using breakeven targets and setting a minimum of a 1:2 risk to reward ratio are essential for the strategy's success.

1-hour chart

15-min chart

As illustrated on the 15-min chart, the price has stabilised at a 50% mean reversion point, bursting higher within the correction of the hourly bullish impulse and has formed a support structure.

The support structure offers an opportunity to enter long, with a stop-loss below the recent lows for a 1:2 risk-reward ratio.

If the price moves higher and forms fresh support from the latest resistance structure, the stop-loss can be moved to breakeven for a free ride towards the target zone. 

If the price breaks below the entry, the stop-loss is there as a last resort. 

Depending on the price action below support, the take profit can be moved to entry to target a breakeven exit. If the price action remains bullish within drawdown, the stop loss can remain in place as last resort. 

Live updates to follow...

Update

As can be seen, the original trendline has been moved lower to compensate for the fact that the prior price action and break over was not a fake-out. 

The price has deteriorated below the entry and support structure. 

If the price fails to hold the trendline support and closes below, the set-up will be nullified and the target can be brought to entry on the hope that the trade will result in a breakeven.

If the price fails to move back to the entry, in the near future, it is highly likely that the trade will result in a small loss (the strategy caters for 40% of losing and breakeven trades)

Update

So far, the price has held the trendline support:

The target remains in place for a 1:2 risk to reward.

Update

Position closed for breakeven due to too much bearish divergence on the MACD.

The market can be monitored again for re-entry IF the conditions and price action form bullish structure. 

At this juncture, the old support structure is expected to act as new resistance and best practise is to limit trading losses - (Afterall, trading is actually just about managing risk).

Monitoring for long entry

As explained, the market can be monitored again for re-entry IF the conditions and price action form bullish structure. 

The following presents a possible outcome IF the price holds in the bullish territory, (price above 21 moving average and MACD above zero):

Update

In early Asia, spreads make the strategy impossible to trade, however, price action is favourable for a long entry here. 

A raw spread or ECN broker is the solution where spreads are minimal.

Update: Long position created

The spread resumed back to 1 pip at an ECN broker enabling the buy limit to be filled and stop-loss placed appropriately below the lows. 

The risk was set to a higher % risk but of course according to the strategy's limitations. 

As can be seen, the price has since moved to breakeven for a free ride towards the target. 

Update: Target achieved

The target of 0.69764 was reduced to 0.6974 to close the trade on signs of exhaustion in the final 15-min bar's price action. 

The exit was well placed

An example of when hindsight can be pleasurable in trading!

 

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