On the daily chart we identify a strong area of support that has been touched 3 times in the past 16 months, with the most recent touch occurring 27 days ago. This could signal an extended uptrend is incoming. The SMA 50 is below the SMA 200 which signals a down trending market, however, price has been forming higher highs and higher lows since touching that important support level 27 days ago. Multiple interpretations exist here. The most likely interpretation is that price is ranging within a channel, bouncing from market tops to market lows, the market low in this case being the strong support level that we've mentioned.
Zooming down into the 1 hour, we can see that a downward trendline of 4 touch points has been violated by a decently sized green candle. Furthermore, we can see that a trendline of 4 touchpoints on the RSI has been violated as well. Both of these indications signal a reversal is about to take place. This signal is reinforced further with the analysis performed on the daily chart, which shows that price has bounced off a strong level of support and is currently rallying upward.
Adding onto this, a bullish divergence signal can be spotted on the RSI. We can see that prices have continued to make lower lows, yet the RSI is showing higher lows. This signal is showing weakness in the downtrend. Prices are falling yet upside momentum is rising, why? Because the downtrend is getting to the point where it can no longer sustain itself, signaling that prices may go up. This signal on its own isn't enough to take a trade. However, when combined with the trendline break of price and of the RSI, and the fact that the market is trending upward on the higher timeframe, the likelihood of a bullish move taking place increases.
From a day trading perspective, a long position can be opened with the stop loss placed slightly below the most recent lows, and a take profit targeting the 23.6% Fibonacci retracement level. The final result being an excellent 1 to 4.31 risk to reward trade that can be placed.
Trade active
Got stopped out of the trade, however, after checking the analysis again there is still strong bullish implicationsRe-entered the trade with the same take profit level, targeting 1 to 2 risk to reward.
This is what it's important to always trade with no less than 1:2 RR, because of situations like this. If I am to win this trade, I would cover my loss and make profit on top of it, thanks to the risk to reward
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.