On the daily chart we can see that price is hovering around a significant support/resistance zone. This area has been touched twice 8-9 months ago, forming a double top reversal pattern, and continuing downward. Price broke this level about a month ago on high volume and was unable to sustain such high prices, resulting in a recent break below this significant support/resistance zone. Price then re-tested the zone and failed to confidently close above the zone, now lingering below it.
A trendline is placed connecting two recent lows, creating a 47 degree angle, signaling a healthy uptrend. This trendline is broken, in addition with the significant support/resistance zone also being broken, signaling a possible downtrend.
Zooming down into the 1 hour, we can identify a downward channel that price has traded within. The significant break below the channel on high volume signaled an exhaustion move. This could be interpreted as a selling climax and one could expect prices to begin rallying up from this point, for a possible reversal. However, prices returned into the channel and were unable to move above the SMA 200 or outside of the channel, thus the downtrend remains intact. Moreover, this exhaustion move broke the significant support/resistance level that we mentioned earlier, and because prices could not move above the SMA 200, this was a successful break of the level, retest of the level, and now continuation of the break.
From a day trading perspective, there is an opportunity to take a quick short term trade of 20-25 pips in a long position. A fair value gap exists due to the red candle at 10:00 AM on Friday so there is a liklihood that price will fill this gap and then proceed downward. The best moment to capitalize on a trade like this would be at market open around 6:00pm EST when spreads are lowest. The goal being to get into a trade that fills the fair value gap/targets the significant support/resistance zone, and setting a stop loss that grants a 1 to 2 risk to reward ratio. The expectation being that price will continue to rally and not make any downturns while it fills the gap. As always with any trade, there is a risk that it will not work and your stop will hit before the profitable move takes place.
Note
Upon further analysis, it may be best to set an alert 1.1140 and consider entering a buy position here instead of taking a buy position at the current price. This new price will allow better stop loss placement.
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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.