Neckline of the Head and Shoulders

Hourly Pin Bar

Test of the Neckline

Pin bar as Reversal pattern

The Euro found support at 1.2445 and formed a pin bar on the hourly chart. The bullish pin bar is a reversal pattern and it shows a strong demand at its level of creation. Hence, market was supported at this level and the strong rally back indicated a bullish rejection of the penetrated price level. The pin bar (bullish sign) led to some follow through and the Euro moved up to the 1.2500 zone

However, on the hourly and 5 min chart we see a kind of Head and Shoulders pattern. The brown neckline of the Head and Shoulders and the supporting upward sloping green trend line got broken at 1:15 p.m. GMT (confirmed on the 5 min chart).

1 hour Pin bar

5 min Head and Shoulders neckline test

As often, market retested the recent support which now became resistance (neckline, green line) at 1:35 p.m. (small red circle). However, the neckline/ green trend line held the market, which also coincided with the 5 min 20 SMA and 61.80 % Fibonacci (fib) retracement of the recent swing down.

The Euro initially moved down after the retest but market did a second retest of the brown neckline (green circle) after market got rejected at the 61.80 % fib extension and weekly S1 at 2:15 p.m. (pink circle).

If market strongly bounce back from the 61.80 % fib extension (no initial penetration or consolidation at this level then a temporary rejection of the current trend on this time frame is likely (either a reversal or a larger consolidation).

However, the Euro could not move above the neckline (green circle) and market resumed its downtrend and finally the Euro reached the Head and Shoulders target (100 % fib extension from the largest swing of the Head and Shoulders moved to the breach of the neckline) (blue cirlce).

Head and Shoulders target also coincided with the March 2009 support level and the 100 % Fibonacci  (fib) extension from the recent swing down. The Euro moved up from there but market penetrated this support level with the beginning of the new 4-hour candle at 4 p.m. after the prior hourly and 4-hour candle already touched (respected) the monthly low of March 2009. However, market only temporary breached this level (brown circle) and the Euro found support at the fib confluence level at about 1.2447 and the daily S1.

The Euro hold at the two 100 % fib extension and the 61.80 % fib extension (rejection) and market closed again above/ at the March 2009 support level (rejection). The Euro resumed its uptrend after the formation of two bull flags (first one at the 5 min 20-SMA resistance).

The price zone of the consolidation at 1 a.m. and at 6 a.m. (on the left of the 5 min chart) gave some support/resistance to the market as the Euro reached this price zone again.

Key Support and Resistance levels

Monthly and Daily Support/ Resistance

Monthly and Daily SR zones

Daily Support Resistance

Monthly Support Resistance

On the daily chart we see the importance of the key level at 1.2456 (monthly low of March 2009-purple line).

1 hour Daily Support Resistance

5 min Support Resistance

The Euro consolidated at the hourly 20 SMA in yesterday's late US session and resumed its up trend in the Asian session. The Euro moved up to the 100 % fib extension (5 min chart). From there, the Euro fell back into the price range of the prior consolidation and the Euro formed a kind of Butterfly pattern on the 5 min chart. Market moved to the 127 % fib extension (target of the butterfly: 127 or 161), which coincided with the 20 SMA on the 4 -hour chart before the Euro bounced back and moved below the low of the butterfly pattern (reversal pattern).


The 5 min chart also shows that the breakout above the recent high at 1.2524 did not get confirmed and market cleared the stops and limit orders above the recent high before the Euro reversed.

The prior consolidation pattern, the pivot point and the 61.80 % fib retracement terminated the retracement up to 1.2515 and market resumed its down trend. However, the Euro found strong support at the monthly low (March 2009) at 1.2456 as well as the daily S1 and weekly S1 and the 5 min breakout candle of yesterday's low (stop fishing-first test) did not get confirmed. The Euro moved up and found some resistance at the hourly 10 and 20 SMA (green circle on hourly chart).

The Euro resumed its downtrend, formed a bear flag and breached the monthly support initially with the beginning of the new 4-hour candle at 4 p.m. after the prior 4-hour candle already touched (respected) the monthly support. However, The Euro could not confirm a break below the monthly support on the 5 min chart and market bounced back from the daily low of June 12th (pink line) and the 100 % fib extension (hourly, 5 min chart).

The Euro moved up from the support level and formed a bull flag on the 5 min chart at about 4:30 p.m.. Furthermore, the hourly candle closing at 5 p.m. shows a strong rejection (pin bar) after the unconfirmed breach of the monthly support level. After the close of the hourly candle at 5 p.m. (confirmation of the strong pin bar) market initially moved up further from the small bull flag and cleared the stops above 1.25 level. The Euro found some resistance above the recent high (stop clearing target reached, 200 SMA on the 5 min chart).


Consolidation price zones (particularly the middle of this zone) very often provide some support/resistance at least for a temporary small bounce when price reaches this price zone again particularly for the first time (however, if one candle closes in the zone (respecting of the level) then the next might move through the consolidation price zone without a bounce (strong trend)). This price behaviour is visible in most of the circled consolidations on the 5 min chart for example the Euro found support at around 10 p.m. GMT, which is likely to be a consequence of the consolidation price zone at around 4 p.m. yesterday. Similarly, the consolidation in the late US session yesterday is likely to be the reason for today's support at this price level.The small consolidation at about 1.30 at the monthly support might not be a good example due to the Timing setup (4.p.m. and the strong tendency of the market to clear stops below highs/lows).