Price target, Pivots, Fibonacci

Head and Shoulders neckline

Butterfly sell pattern

Chart pattern Price target

On the daily Chart of the EUR/USD we see a Head and Shoulders Chart pattern. The Euro closed at the brown neckline on the 5th of July and broke through the neckline on the next trading day, which triggered the Head and Shoulders pattern.


A close at Support/ Resistance levels, like the close at the Head and Shoulders neckline (blue circle), often weakens this Support/ Resistance level (see Breakout Trading/ Breakout Timing) so that a break of this S/R level (for a true breakout or a false breakout where price bounces back strongly - Stop Running and fooling breakout traders) is likely.


The target of the Head and Shoulders pattern is often the 100 % Fibonacci Extension level from the price range of the largest swing of the Head and Shoulders formation moved to the neckline break. The smaller 61.80 Fibonacci Extension level also led to a minor price reaction of the EUR/USD.

The EUR/USD bounced from this Head and Shoulders price target and started a strong upward leg after hitting the 100 % Fibonacci Extension price target of this chart pattern.

Daily Head and Shoulder pattern

The 4 hour chart below shows that the recent up move in the EUR/USD market found resistance at the monthly S1, which coincided with the daily Resistance (pink line) and the consolidation price zone of the small and tight consolidation chart pattern on the left side of the 4 hour chart below. Hence, the level around the monthly S1 at 1.2388 was likely to lead to a price reaction due to the confluence of different resistance levels.

4-hour Eur/Usd Chart Analysis

The 1 hour chart below emphasises the importance of Pivot Point analysis. The daily Pivot at 1.2243 led to a strong upward move and marks the low of today's trading range, whereby the daily R1 and the monthly S1 capped the market price besides the other reasons mentioned above.

The red ellipses show Breakout Timing setups, where market price closed at Support/ resistance before breaking it with the start of the new candle, whereby the blue ellipses are marking price reactions at important Support/ Resistance.

1-hour Eur/Usd Chart Analysis

The 5 min Euro Chart shows the importance of the daily Chart level at around 1.2290 where marked price reacted repeatedly. Furthermore, the daily chart level also changed its role between support and resistance repeatedly depending on price action in regards of true/ false price breakouts of this level.

In addition, there is a Butterfly sell pattern on the 5 min EUR/USD chart, which worked out very well. The failed breakout of the consolidation pattern (green circle) to the upside terminated at the monthly S1, which coincided with the 127 % Butterfly level, and price broke through the opposite consolidation boundary with strong momentum.

5-min Butterfly sell pattern

Market Manipulators cleared the stops

Taking out Stop orders

Hammer Candle Pattern

The Euro

1-hour Clearing of  Stop Orders by Manipulators

gaped down to the monthly S2 Pivot in the Asian session and from there the Euro retraced up to the hourly 10 SMA.

The following downward swing terminated at 8:55 a.m. GMT at 1.2082 with the creation of a hammer candle pattern/ price rejection (5 min chart red ellipse).

The Euro moved up and slightly penetrated the recent high to reach 1.2139 (green line) before marked rolled over and then penetrated the recent low at 1.2082 (blue line). This price action was purely Stop Running. The Market Manipulators cleared the stops at the recent Highs and Lows (no confirmation on 5 min chart).

The relatively long 1 min breakout candle at 1:42 p.m. (not shown) suggests the clearing of many stop and pending limit orders. Market did not close below the recent low (1.2082-blue line) on the hourly chart. The clearing of the stops on both sides (low/ high) sometimes precedes larger moves as the mainstream traders are already stopped out or fooled into the wrong market direction.

In the US Session, the EURUSD Manipulators also cleared the stops above the new high with a slight breach of this level after market already took out the stop market orders at the low of today's market range.

The red ellipses on the hourly chart shows Breakout timing setups at 7 a.m. and 1 p.m.. The Euro closed at the monthly S2 (respecting support) and market moved below it with the beginning of the new hourly candle (Termination of the bear flag/ consolidation at 7 a.m..).

We will see whether the gap opening at 1.2156 (brown line) will be closed soon.

5 min Candle Pattern Hammer | Stop Running

Wedge Pattern

Trading the Wedge

Euro Dollar Chart Analysis

Daily Head and Shoulder

Wedge Pattern on the Euro Chart

During recent trading days the Euro formed a kind of up trending wedge pattern on the daily/ 4-hour chart. The wedge pattern found resistance at the daily low of June 1st (pink line) and the trading price zone of the recent consolidation (green daily circle) and support at the 127 % butterfly target and the 61,80 % weekly fib extension.

The Euro broke below the rising pink daily trend line and market cleared the stops below the recent daily low (13 of July-blue line). The  wedge pattern formed three rising highs (happens often) before market turned around.

4-hour

The 4-hour chart (above) shows the typical timing setup (red circle). The Euro broke below the daily S1, yesterday's low (red line) and the rising daily trend line (pink line) after the prior 4-hour candle closed at support (respecting it) and the new 4-hour candle started (not immediately).

The hourly chart (below) shows that the price zone of the bull flag (green circle) provided some support yesterday (9-10 a.m.). Yesterday's two marked candles with the red ellipses show some bearish pressure. The first hourly candle marks the third high but market retraced most of the hourly trading range (rejection) and the second marked candle is a doji (also kind of evening star pattern). Today, the Euro formed a consolidation between the daily and weekly pivot but market created lower highs and a lower low before the Euro broke below it.

1 hour Euro Dollar Analysis

The 5 min chart (below) shows how price reacted at support/ resistance and some consolidations whereby the consolidation at about 10 a.m. GMT had the typical three-wave structure. The marked candle at 2 p.m. (red ellipse) between the two consolidation patterns shows that the break of the red support line occurred with the beginning of the new hourly candle (Timing). The daily S2 provided support at 2 p.m. and changed its role to resistance at 4:45 p.m..

5 min Euro Dollar Analysis

Triangle Chart Pattern

Triangle Consolidation

Ending Diagonal failed

The Euro moved lower, consolidated at yesterday's low with a three swing triangle consolidation pattern (9 - 11 a.m. GMT, red circle on 5 min chart below) and resumed it's down trend to the 127 % butterfly target/ daily S2 to find some support.

Yesterday's ending diagonal triangle failed. We might interpret the price action on the hourly/ 4-hour chart as a wedge/ ending diagonal (blue lines) but the pattern does not totally convince me. A fresh lower low would lead to a failure of the pattern.  However, the wedge pattern would fit to the butterfly reversal pattern.

The main question will be whether the 127 % butterfly target (1.2163) could provide some solid support or whether the Euro will continue to the 161 % butterfly target at 1.2005.

On the 4-hour chart (below) we see a bear flag (blue circle), which got triggered and the Euro moved to the 127% butterfly target. This support level further got strengthened due to the daily S2 and the 100 % fib extension. The green circles show how the 20 SMA provided resistance and the red circles show yesterday's timing setups.


On the 5 min chart (below) we see the three wave/ triangle consolidation (red circle), which is visible as a bear flag on the 1 hour chart. The green circle shows a small bear flag prior to the breach of yesterday's low (red line) with the beginning of the new hourly candle at 11 a.m. (Timing). The blue circle on the 5 min chart shows another bear flag which got triggered with the beginning of the new 4-hour candle at 12 a.m. (Timing setup).
The Euro found support in the price zone of the 127 % butterfly target/ daily S2. The fact that market could not breach the 61.80 % fib extensions from the previous swings and bounced from it (not consolidated at it- no bear flag) is often a sign for a larger consolidation or reversal (brown circle).

Next support zone would be the 61.80 % weekly fib extension/ weekly S1 at 1.2133.
Next resistance is Monday's gap opening at 1.2252 and the low of June 1st at 1.2288

4-hour Failed Ending Diagonal Pattern

5 min Triangle Pattern

Ending Diagonal Triangle

Ending Diagonal Triangle

Wedge Pattern

Forex Chart Reading

4-hour  Ending Diagonal Triangle/ Wedge Pattern

Today, the Euro moved up in the European session to the low of 1.2288 (pink line-low of June 1st). From there, the Euro turned around and penetrated yesterday's low. The overall price action on the 4-hour chart might be seen as an ending diagonal triangle/ wedge (reversal pattern).

Yesterday and today until the US session the Euro got supported by the gap opening/ low of Monday (brown line) and market moved to the other key level at 1.2288 (low of June 1st-pink line). Market bounced from this level and found  temporary support at the brown line again. However, at 4 p.m. the Euro consolidated at the brown line (Monday's gap opening, green circle on 5 min chart)) and breached this level with the beginning of the new 4-hour candle after the prior 4-hour candle respected this key level (Timing setup-second red circle on 4-hour chart reading). The Euro penetrated yesterday's low. However, the hourly candle found support at the declining trend line and the 4 p.m. hourly candle closed above yesterday's low and bounced back to the brown line (hourly chart below).
From there, the Euro initially moved up to the daily pivot and reversed with the FOMC news at 8 p.m.. Market strongly moved down and broke the recent low at 1.2226. The Euro found support at the daily S1 and the 100 % fib extension on the 5 min chart.

The third succeeding breach of a prior daily low could terminate the diagonal pattern/ wedge (see 4 -hour chart above,1-5). We have to see how price develops further and whether it will be in accordance with the pattern.

On the 4-hour chart (above) we also see how the declining 20 SMA provided resistance to the market and the pink line (low of June 1st) acted as support/resistance yesterday and today (green circles). The two red circles on the 4-hour chart shows the recent two timing setups (break of support after the prior 4-hour candle closed at it (respected it))

The blue circles on the 5 min Euro chart reading (below) show how price reacted at the major support levels (brown line, daily pivot, pink line). The red circle shows a typical three wave consolidation, the small black circle shows the break of the daily pivot (second test and strong momentum candle prior to the break respecting (closing at) the resistance thus weakening it), the brown circle shows a bear flag prior to the break of the daily pivot and the green circle shows a bear flag and Timing setup (4 p.m. after 4-hour close at resistance) prior to the break of the brown line.

5 min EurUsd Chart Reading

1 hour Euro Usd Chart Reading

Price shakeouts of weak hands

Forex Chart Patterns

4-hour Euro Dollar

1 hour Euro Dollar

5 min Euro Dollar Chart Analysis

Consolidation Patterns

Weak hands getting shaked out in Trading

The Euro moved up to the1.2329 resistance level (purple line-October 2008 low and 20 SMA on the 4-hour chart) and from there market resumed its down trend and the Euro created a new daily low.

On the 5 min chart (below) we see that consolidations very often consists of three swings (red circles). One of them occurred in the Asian session between 2 - 3 a.m. GMT and after termination market moved to the 100 % fib extension. Another one occurred at about 10 a.m. and this consolidation is also the left shoulder of the Head and Shoulder pattern on today's market top, which took place at the 4-hour 20 SMA and the October 2008 low (purple line). The right shoulder is also a three swing consolidation and after termination the Euro penetrated the brown neckline. However, market consolidated below the neckline and slightly penetrated the neckline to the upside again. A reversal (failing of the H&S) or at least a shakeout got more likely due to the length of the consolidation below the neckline (Good trading opportunities at important levels/ pattern termination normally do not give much time for positioning as it is recognized by many traders and thus triggered fast).

The lengthy consolidation followed by the upside break of this consolidation through the neckline led to a kind of shakeout of the weak hands. The Euro found resistance at the 20 SMA on the 5 min chart and the price zone of the prior consolidation (right shoulder) so that the Euro resumed the down trend and triggered the H&S pattern. The 1 a.m. hourly candle triggered the stops below today's (green line) and yesterday's low (blue line) but the candle closed and formed a bull flag (on 5 min chart) at the recent hourly low at 1.2281 (blue line). The bull flag (blue circle) got triggered and market moved to the daily pivot and the 100 % fib extension on the 5 min chart. From there, the Euro resumed its down trend again. The 2 p.m. hourly candle closed at the daily S1 (red circle on hourly, weakening this level) and the following hourly candle starting at 3 p.m. moved below it and closed at Monday's gap opening at 1.2253 (brown line). Another timing setup occurred with the start of the new 4-hour candle at 4 p.m.. The Euro terminated it's three swing consolidation pattern on the 5 min chart at 3:45 p.m. (red circle) and market moved lower again after the previous 4-hour candle closed and weaken the gap opening support (brown line). However, the Euro did not confirm the breach of the prior consolidation low at 1.2245 (green circle) and the Euro reversed and the 4 p.m. hourly candle closed at the gap opening (brown line). Market is currently consolidating around this level.

The pin bar at 8:25 a.m. after the penetration of the 1.2288 level (pink line-low of June 1st) led to a non-confirmation of the break and the Euro moved up again after the bull flag just above the pink line. A hint for the continuation was the close of the 9:20 candle at/above the daily pivot with the confirmation of the following 5 min candle.

Important chart levels like Pivot Points

Daily Pivot Points

Consolidation patterns 

5 min Daily Pivot Point

The Euro

closed at the low of June 1st (pink line) after market slightly penetrated this important chart level during the day. Today, market gaped slightly below Friday's low but initially reversed, closed the gap and consolidated around the pink line most of the day. On the 5 min chart we can see that the daily low of June 1st (pink line) acted as support/ resistance. The breakout candle at 3 p.m. (penetrating the pink line) did not get confirmed and market reversed to the upside after hitting the price zone of the consolidation between 9 - 10 a.m. GMT and the 61.80 % fib extension. The main resistance to the upside was the daily pivot point.


The Euro formed a bull flag/ typical 3-wave-consolidation (red circle) before penetrating the daily pivot (important chart level) for the third time (level already weaken) whereby market breached this important chart level (no confirmation) and triggered most of the stops above the daily pivot. The Euro is currently consolidation at the daily pivot.

The positioning of the stops above a high/low or striking levels is easy to anticipate and market often tends to trigger these stops. Very often these levels get penetrated and stops/limit orders get triggered but market reversed (no confirmed breakout-only stop fishing).

News Release: Trading the ECB

Triangle Consolidation Breakout

ECB Meeting and Chart Analysis

Bear Flag patttern

The Euro moved down strongly after the news release from the ECB and the Euro took out the low from the 28th of June.

1-hour Triangle Consolidation Breakout

4-hour Bear flag

On the 4-hour chart we see that the Euro formed a bear flag (blue circle) after yesterday's down swing, which got triggered with the news release from the ECB. The Euro moved down straight and currently market found support at the monthly S1 below the recent daily low (pink line-28 of June).

On the hourly chart we see that EUR/USD formed a triangle (bear flag on 4-hour). The up-trending green line of the triangle got touched from the 8 a.m. hourly candle (weaken). The following hourly candle at 9 a.m. closed below the green line and the 10 a.m. hourly candle took out the triangle low (green line-grey circle). The Euro moved back into the price zone of the consolidation, which usually acts as resistance (12 a.m. -blue circle). Market moved down strongly from there with the news release form the ECB.


The brown circle on the 5 min chart (below) shows the breach of the up-trending line of the triangle consolidation pattern, which then started to act as resistance. Market initially moved down to the daily S2, penetrated it and retested this level from the downside (green circle) before resuming the down trend to the 61.80 % fib extension, the daily S1 and monthly S1 at about 1.2387 (blue circle). This swing down penetrated the recent daily low at 1.2707 (28 June) and market retested this level again from the downside (also 10 SMA-red circle) before market moved down to the 61.80 % fib extension at 1.2363 (pink circle). Market currently consolidates around the monthly S1.

5 min Triangle Breakout Euro Analysis

Stop Fishing with False Breakouts

False Breakouts to catch Stops

Stop Fishing in Forex

1 hour Stop Fishing | False Breakouts 

The Euro

 penetrated the monthly pivot (second test) but closed above it on the hourly chart (rejection). From there the Euro tried to break to the upside but market could not break the orange line (January low). The penetration of the recent pivots (low, high - red circle on hourly chart) and thus the stop fishing on both sides very often precedes larger moves in the market as most of the traders are already stopped out or trapped in the wrong position.

The failed break to the upside (orange line) with the clearing of the stops above the recent high (1.2614) of the short positions led to a third test of the monthly pivot today, which got already penetrated at the second test (weaker now). Some indication for a break of the monthly pivot were the facts that it was already the third test, the hourly close of the 11 a.m. candle below the monthly pivot and the confirmation of the break at 12 a.m. on the 5 min chart and at the 3 p.m. hourly candle close (lower close than the range of the breakout candle-blue circle on hourly).

 The blue circle on the 5 min chart at 1 p.m. shows how the monthly pivot started to act as resistance now and the green circle shows a typical 3-wave consolidation pattern before market impulsively moved down. The Euro found some support at  61.80 % fib retracement of the recent swing up at 1.2517 (brown line) and from there the Euro retraced up to the 61.80 % fib retracement of the recent impulsive wave down at 1.2543.

The consolidations below the weekly and monthly pivot on the hourly chart can be seen as bear flags.

Prior to the impulsive wave down market penetrated the recent lows (blue and red line), which often gives some short term support (see the candles with the long wick which penetrated these levels (12, 12:15, 14;20 p.m.-stop fishing accomplished).

Weekly and Monthly Pivot Point

On the 5 min chart (below) we also see the changing role from support to resistance of the weekly pivot and the August 2010 low (purple line). This price zone provided support in the Asian session (ellipse) before market breached this level (9 a.m.) and retested it at around 10 p.m. (now resistance).

5 min  EUR/ USD Chart analysis

Stop Clearing and Price Rejection

Price Rejection at Support/ Resistance

Stop Clearing at Key S/R levels

Pivot Points in the Euro

Daily Double Top

EUR/ USD had a relatively quite session. On the daily chart we see that the support level around the monthly pivot at 1.2568, the low of August 2010 at 1.2588 (purple line) and the 20 SMA (purple) held the market so far.

1 hour Pivot Points

The circled areas on the hourly chart (left) show how price bounced from support/ resistance.

On the hourly chart we see that the Euro moved up to the daily pivot at 1.2611 at 7 a.m. GMT but market could not breach the resistance and moved lower from there. The Euro penetrated the monthly pivot and cleared some stops below it and yesterday's low but the Euro closed above this key resistance level on the hourly chart (green circle).

After the clearing of the stops and the rejection of  prices (close above the monthly pivot on the hourly and higher low on the 5 min chart) market moved to the other side of the consolidation (1.2568 - 1.2614) to test it.

The EUR/ USD breached the pivot point and the recent high at 1.2614 (stop clearing) but the key level at 1.2624 (orange line- January low) provided strong resistance and the Euro bounced back.

The false breakouts (stop clearing) seem to be typical in a quite session when everyone is waiting for major news and thus traders are lacking commitment/ low participation.

5 min Forex Chart Education

On the 5 min chart (above) we see how price bounced from support/ resistance (blue circles) and the formation of consolidations/ bull/ bear flags (red circles) as well as some Fibonacci extensions (100 % and 161 %).

The price zones of the consolidations (red circle) provided some temporary support/ resistance as the market moved back into these zones.

At 9 a.m. market formed an inverted Head & Shoulder at the purple line (August low 2010). During the pattern market did not confirm the break of the purple line (no close of the succeeding candles below the range of the 9:30 a.m. breakout candle on the 5 min chart). Market breached the brown neckline and moved up to the H&S price target (100 % of the larger swing in the H&S-(left shoulder to head)-moved to the break of the neckline).

Between 1 and 3 p.m. the Euro breached the monthly pivot but the Euro formed a higher low and closed above the monthly pivot on the hourly chart (rejection of the breakout). From there, the Euro moved up to test the other side of the consolidation range and market found temporary resistance at the weekly pivot/ 161 % fib extension at 3 p.m. and the daily pivot at about 4 p.m.. The chance of a breach of the daily pivot increased due to the bull flag, the rising 10 SMA, the prior test at 7 a.m. (second test now) and particularly the fact that the prior 4-hour candle closing at 4 p.m. already touched (respected) the daily pivot so that this resistance level got weaker with the beginning of the new 4-hour candle (Breakout Timing setup).

Key Support/ Resistance Levels

Important Support/ Resistance

Key S/R Levels in the EUR/USD

Key Support/ Resistance Levels 

4-hour Euro Chart

Daily 20 SMA and Pivots

The Euro Dollar moved up to the 61.80 % fib extension (A-B at C). Today, market bounced back from this resistance level. The monthly pivot and daily 20 SMA (purple line) currently act as support. The low of January at 1.2624 (orange line) and the low of August 2010 at 1.2588 (purple line) are key Support and Resistance levels.

On the 4-hour chart (left) we see that the Euro respected the orange line and the 4-hour 10-SMA (red line). However, after the close of the bearish 4-hour candle at 12 a.m. (red circle-left) (Timing setup) the Euro fell below the orange line/ 10 SMA.

On the 1 hour chart (below) we see that the 12 a.m. hourly candle (A) respected the daily pivot at 1.2598. The 1 p.m. candle penetrated the pivot point and respected the weekly pivot at 1.2586 and the purple line (August 2010 low) but closed above the daily pivot on the hourly chart. However, the 3 p.m. hourly candle resumed the down trend and penetrated the already touched/ respected support levels (second test). The Euro found support at the monthly pivot point key level.

1 hour EurUsd key S/R levels

The price zone of the circled consolidation (blue) from Friday also provided some temporary support.

 On the 5 min chart (below) we had a kind of inverted Head and Shoulder in the Asian session with the green neckline and a prolonged left shoulder at the key support level of the low of January (orange line). At 11 a.m. we see a typical 3-wave consolidation at the support level (orange line) before the Euro resumed its downtrend. The duration of the consolidation is the same like the duration of the prior 5-min down swing. Most of the circled candles on the 5 min chart show how price bounced at key support/ resistance levels

5 min Euro US Dollar