Tuesday April 6, 2010 - 19:07:52 GMT
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FXTimes: Daily Technical Update AUD/USD: Pattern Breakout Offers Valuable Lessons
AUD/USD: Pattern Breakout Offers Valuable Lessons
- 4H: The AUD/USD formed an ascending triangle
yesterday, and looked ready to breakout yesterday as the rising support
converges with the flat resistance. Anticipation was for the break
above. (Refer to Daily Technical Update 4.5.2010 AUD/USD).
- The market is now heading towards 94.00. This triangle breakout
however came with some lessons in patience, and is an example of why
the trend is your friend.
- First, the market created a bearish butterfly around 0.9200
(highlighted in yellow). However, notice the position of the bearish
pattern. It came at the topping action of a rally which broke a
declining resistance. Of course, the established trend has been bullish
so there should not have been anything but a short-near-term bearish
- The market did not decline, but instead continued to test the
0.9210 resistance. THEN, at after the Asian session got underway there
was a strong bearish move that broke below the rising support.
- Without any other clues from the market, that would have been a
bearish signal. However, a rally immediately followed. This could have
been a pullback.
- Patience wins out here; waiting for a pullback we see that the
break below was a false signal. Instead, the market surged and broke
the 0.93 mark.
- The 0.9210 mark was tested quick and acted as support. On this side of the pattern, the breakout is valid.
- The lessons are that sometimes, a price pattern develops into a
larger price pattern. This does occur sometimes with Gartleys and often
with head and shoulder patterns.
- Also, patience in waiting for a pullback/throwback can eliminate
some false breakouts, although you will also miss some moves that wonâ€™t
- Finally, donâ€™t forget â€“ the trend is your friend.
Check out todayâ€™s commentary on the RBAâ€™s latest interest rate decision and how that impacted the Aussie.
Commodity Trading Advisor
Information and opinions contained in this report are for
educational purposes only and do not constitute an investment advice.
While the information contained herein was obtained from sources
believed to be reliable, author does not guarantee its accuracy or
completeness. CMS will not accept liability for any loss of profit or
damage which may arise directly, indirectly or consequently from use of
or reliance on the trading set-ups or any accompanying chart analyses.
Foreign currency trading is not conducted on an exchange. CMS is
acting as a counterparty to its clientsâ€™ transactions and as a result,
CMSâ€™ interests may be in conflict with its clients. Since CMS acts as
the buyer or seller in the transaction one should carefully evaluate
any trade recommendation provided by CMS or any of its solicitors.
Foreign currency trading involves a substantial risk of loss and may
not be suitable for all investors.
All screenshots are made from VT Trader 2.0 and are of actual market data at the time of the screenshot.
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