USDCAD → Bottom of Trading Range! Looking for Long Entry.
Updated
USDCAD is at the bottom of a trading range and near the Weekly 200EMA which acted as good support in the last bull trend opportunity from July to October. Now that we're here, should we long?
How do we trade this? 🤔
We almost have enough price action to justify a long entry. Longing now would be maximally risky because we don't have a good buy signal bar yet. You could enter now with the understanding that every time we've hit these levels since September 23, a long as been profitable. I prefer more confirmation and thus, more probability before entering a trade. I think we need at least a good strong buy signal closing in the 131.300 - 131.600 range. With this signal, we can enter a trade a 1:2 Risk/Reward Ratio to the top of the trend.
Wait for a couple more Daily candles to show such support before longing. Until then, lets be patient on the sidelines!
💡 Trade Ideas 💡
Long Entry: 132.665
🟥 Stop Loss: 130.000
✅ Take Profit: 138.000
⚖️ Risk/Reward Ratio: 1:2
🔑 Key Takeaways 🔑
1. Trading Range after Bullish Price Action, Bias to Long.
2. Near Trading Range Support and Weekly 200EMA, Look for Entry.
3. Look for Test of Support before Entering a Trade.
4. Target 1:2 Risk/Reward, Stop Loss below 200EMA, Take Profit at Top of Range.
5. RSI at 39.00 and below Moving Average. Needs to Fall More before Long.
💰 Trading Tip 💰
Trends typically have three legs in either direction. Signals of a reversal include strong buy or sell bars with large wicks, higher highs and lower lows get weaker, and responses to the reverse direction get stronger. Confirmation lies with double and triple bottoms with a strong candle closing on or near its low/high.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and comment if you found this analysis useful!
How do we trade this? 🤔
We almost have enough price action to justify a long entry. Longing now would be maximally risky because we don't have a good buy signal bar yet. You could enter now with the understanding that every time we've hit these levels since September 23, a long as been profitable. I prefer more confirmation and thus, more probability before entering a trade. I think we need at least a good strong buy signal closing in the 131.300 - 131.600 range. With this signal, we can enter a trade a 1:2 Risk/Reward Ratio to the top of the trend.
Wait for a couple more Daily candles to show such support before longing. Until then, lets be patient on the sidelines!
💡 Trade Ideas 💡
Long Entry: 132.665
🟥 Stop Loss: 130.000
✅ Take Profit: 138.000
⚖️ Risk/Reward Ratio: 1:2
🔑 Key Takeaways 🔑
1. Trading Range after Bullish Price Action, Bias to Long.
2. Near Trading Range Support and Weekly 200EMA, Look for Entry.
3. Look for Test of Support before Entering a Trade.
4. Target 1:2 Risk/Reward, Stop Loss below 200EMA, Take Profit at Top of Range.
5. RSI at 39.00 and below Moving Average. Needs to Fall More before Long.
💰 Trading Tip 💰
Trends typically have three legs in either direction. Signals of a reversal include strong buy or sell bars with large wicks, higher highs and lower lows get weaker, and responses to the reverse direction get stronger. Confirmation lies with double and triple bottoms with a strong candle closing on or near its low/high.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and comment if you found this analysis useful!
Note
As shown in my initial analysis, USDCAD has made contact with the bottom of the trading range at the 200EMA and begun to show support candles on the Daily chart. We need a strong bull confirmation bar to close above the 4HR 30EMA and the RSI to be above the Moving Average to justify our long position. Additional probability of profit can be gained by waiting for a second test on the support line, but I do not believe this is required to enter the long.
Note
We have the strong bull bar closing on its high above the 4HR EMA, we've found support at the Trading Range support line, RSI is low above the moving average. Candles to the left of the Trading Range are in a bull trend, giving us a bullish Trading Range bias.
It's now reasonable to long. Entry at 1.33200, sell half of my position at 1.35900 (1:1 Risk/Reward) and move the stop loss up to my entry (lock in profits), sell the remainder at 1.38600 (1:2 Risk/Reward). Initial stop loss set below the trading range at 1.30500, setting my initial risk at 2.03%.
Note
Zooming into the 4HR chart, USDCAD finished last week with two large wick candles in both directions, giving us a state of indecision. We still need a break of the 30EMA on the Daily chart and we have some demonstrated support on the 4HR 30EMA, but we need a sign of strength from the bulls. A strong bull candle closing on or near its high around the 4HR 200EMA will provide some additional probability in the long trade that I opened last week.
The RSI is also high on the 4HR and below the Moving Average, which supports my projected trajectory of the price pulling back before finding new highs. It may not fall below the 30EMA, but simply go sideways for awhile just above it until the RSI resets on the 4HR then rises.
Trade active
Since our long entry last week at 1.33200, USDCAD has climbed up the Daily 30EMA and found some resistance. The composition of the bars leading this upward motion are mostly doji's (one bar trading ranges - wicks on top and bottom with small bodies), which means the bulls aren't showing great strength. This leads me to believe we need a pullback before we break the 30EMA.
The outlook is still bullish because our premise has not yet been invalidated. Because we're in a trading range, that premise isn't invalidated until we get a close below the trading range support at 1.31400.
Trade active
I've adjusted my first take profit to the 200EMA ribbon! My main driver is how the price action played out; weak bars on the first leg followed by a trading range on the 1HR/4HR chart I count as 2 legs, a break of the 30EMA and now making contact with the 4HR 200EMA which is a significant resistance area.
I have the justification to tighten my original stop loss to just below the last low near the bottom of the trading range at 1.31550, making this first take profit a 1:1 Risk/Reward. The second take profit is now 1.36491. Now that the first take profit has been taken, the stop loss has been moved to my entry price of 1.33200 so profits are now locked in!
Note
Correction to my last update; the significant resistance is the Daily 200 EMA, not the 4HR 200 EMA.Trade active
USDCAD closed above the Daily 200EMA as depicted by my previous update! We now need a slight pullback to test the EMA area for support. If we get strong support, its likely we'll get near or beyond our second take profit target.
The next update will come once we confirm or deny that EMA ribbon support.
Note
Zooming into the 4HR chart, we've approaching the price area of the EMA ribbons and have thus far not seen any significant bear candles. This is a good sign to start, but now we need a strong bull candle response to this price area to confirm the continuation.
There is no room in this trade to back out early, we need to let the second half of our trade play out. As a trade continues and take profits are hit, intervention needs to be significantly reduced. The more intervention, the more variables we add to our trade execution which makes it more difficult to determine whether or not our strategy works. Limiting intervention is key to optimizing your trade strategy.
Trade closed manually
We're going to close out this USDCAD trade and find another entry. We have a strong bear bar closing near its low followed by a doji below the 4HR 200EMA. We needed support on the EMA ribbons and the bull strength is not showing itself. We close the second half of our position at 1.34253, 105 pips in the profit! The first half of the position closed at 1.34900 at 170 pips in the profit.
Another good trade in the books, but I don't believe this upward motion is over. I'm now waiting for a pullback toward the open of our trade around 1.33200 or slightly higher. If the price goes back up here, I'll wait for a pullback from that move.
A new USDCAD analysis will be coming soon!
-Joe Dean
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