Butterfly pattern and price targets

Butterfly Sell pattern

Weekly and Daily Pivot

The Euro

formed a butterfly sell pattern on the 5 min chart. The turn around at the 127 % butterfly sell target coincided with the 61.80 % fib retracement on the hourly chart and the weekly R1. We also see the importance of pivot points for example of the weekly and daily pivot and daily S1 and weekly R1.

Market initially moved down at 8 a.m. to find support at the weekly Pivot Point. From the weekly Pivot the Euro bounced up strongly, creating a small bull flag at around 8:45 a.m.and later the Butterfly sell pattern. 

The Butterfly pattern is a typical reversal chart pattern so that market typical retraces the preceding move after the failed breakout to the 127 % or 161 % Fibonacci extension level from the preceding Consolidation pattern at 10 a.m.. The Euro retraced back to the typical 161 % Butterfly price target, which also coincided with the 61.80 % Fibonacci retracement level of the recent swing up at around 1 p.m.at 1.29. 

The Euro consolidated above the 1.29 price level with the typical three swing consolidation before breaking temporarily through the 1.29 level (psychological level). Later in the US session the Euro has been in a choppy trading environment with the daily Pivot as the upper border and the 1.29 price level as the lower border.

5 min Butterfly Sell Pattern, Butterfly Price Target

Importance of the 200 SMA

EURUSD Technical Chart Analysis 

The 200 Simple Moving Average

The Euro

found resistance at the downward sloping 200 SMA (Simple Moving Average) and support at the daily S1 after market took out the stops and triggered the breakout limit orders below the recent low on the left side of the chart (blue line). After the Stop Run - Market Manipulation - got accomplished there was "nothing" to hold back the Euro from rising upwards. The resistance of the recent low (blue line) and the 20 SMA (purple line) got respected and broken with the beginning of the new hourly candle (Breakout Timing). For example market closed at the 20 SMA resistance with a strong candle and the EUR/USD broke through this resistance level with the beginning of the new hourly candle at 8 a.m. on the 1st October.

In general, the 200 SMA is often acting as support/ resistance and the 200 SMA shows the larger trend direction if the SMA, particularly when this Simple Moving Average is strongly sloping. Otherwise, the 200 SMA indicates a sideways range bounded market when the 200 SMA is more flat than sloping.

1 hour 200 SMA

Weekly Euro USD Analysis

Price Reversal

Triangle Consolidation

The weekly EURUSD Chart

shows the striking monthly low of January 2012. The Euro is currently trading at this striking low combined with the down sloping weekly 20 Simple Moving Average (SMA), which both is likely to act as resistance.

Weekly EUR/USD Chart Analysis

On the 1 hour chart we see the recent price breakout to the upside out of the large triangle consolidation pattern. The EUR/USD price moved up to the first butterfly sell target (127 %), which coincides with the daily R3 and monthly R1 Pivot Point resistance.



The confirmation of the butterfly pattern would implicate a larger price reversal below the recent triangle consolidation pattern. Thus, the prior market price breakout through the upside would get completely reversed - failed breakout. The price target of the butterfly sell chart pattern is normally the 161 % Fibonacci target - see popular chart patterns.

1 hour Butterfly pattern, Triangle Breakout 

The 5 min chart below shows the price reversal at the resistance level. The failed price breakout candles might be seen as a evening star pattern. After the initial price reversal market created a typical three wave consolidation pattern and later a small bear flag before the Euro continued the downtrend to catch the stop orders below the recent striking low - Stop Running. Often a small price retracement occurs after the penetration of an important chart level like the recent striking low to catch also some stops of the breakout traders.

5 min False Breakouts

Fibonacci and Pivot Analysis

Consolidation and Continuation Chart pattern

Fibonacci Retracement and Extension

The two green ellipses are consolidation pattern, which acted as continuation chart patterns - Flag and pennants. The consolidation price zone of the first Consolidation/ Continuation Chart pattern (green circle) acted as support as market price tested this price zone of 1.2460 again. This support zone got strengthened through the 61.80 % Fibonacci Extension level of the recent swing and the 61.80 % Fibonacci retracement level.

The Euro moved up to the price zone of the black circled Consolidation pattern, which looks similar to a small Head and Shoulders pattern (H&S). As often, the first retrace into a price zone of a prior consolidation held the first test and the EUR/USD moved strongly down again to the daily support level (pink line). The Euro consolidated for a while after hitting the daily support before the second strong leg down moved price to the Daily Pivot Support. From there, the EUR/USD bounced strongly up above the recent daily high to clear some stops and fool some breakout trader.

The failed first breakout often occurs due clear the stops and fool some breakout traders at striking chart levels like market highs and lows. This manipulative triggering of market orders is also visible on the further price action on the chart, whereby the weekly R2 held the market drop in the beginning of the US trading session.

lign="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;">

5 min EURO USD Pivot Points and Fibonacci

Butterfly buy pattern

Fibonacci Price Targets

161 % Fibonacci Extension target and 61.80 % Fibonacci Retracement

Butterfly Buy Pattern on 5 min chart.

On the 4 hour chart of the EUR/USD we see that market price found support at the 61.80 % Fibonacci retracement and the daily S1 Pivot. From there, the Euro moved up to the 4-hour 10 Simple Moving Average (SMA) and the daily and weekly Pivot point resistance, where price started to slightly retrace back.

4-hour Fibonacci  Retracement

The 5 min Euro Chart below shows the development of a Butterfly buy chart pattern, which led to the sharp price reversal visible on the 4-hour chart.

The large black circle shows the butterfly pattern -three wave consolidation-after an impulsive move. The Euro passed the minor/ first butterfly buy target at 127 % Fibonacci Extension of the consolidation pattern and market price moved further to the final 161 % Fibonacci level of the Butterfly buy pattern. From there, the Euro reversed sharply to the upside and market reached the 161 % Fibonacci Extension of the whole swing from the high of the consolidation pattern/ Butterfly pattern to the market low.

In addition, the 161 % Fibonacci Extension level at the market bottom, which usually acts as the buying opportunity in the butterfly buy chart pattern, also coincided with the 100 % Fibonacci Extension level (of the recent swing down prior to the consolidation pattern moved to the high of the consolidation pattern).

Furthermore, the final 161 % Butterfly target coincides with the weekly Pivot point. The daily Pivot point might have acted as further resistance zone.

5 min Butterfly buy pattern

Fibonacci Retracements and Fibonacci Extensions

Important Fibonacci levels

61.80 Fib Retracement | 61.80 % and 100 % Fib Extension levels

Understanding Fibonacci Analysis

The charts below show the importance of the Fibonacci Analysis, which consists of Fibonacci Retracement levels as well as Fibonacci Extension levels.

Fibonacci Retracement levels highlight some important price levels during the retracement of a recent swing, which could lead to some price reaction. The 61.80 % Fibonacci retracement is the most important price retracement level (IMO).

The Fibonacci Extension level is the complete price range of a recent swing moved to the highest retracement level of this recent swing to target important price levels during the next impulsive leg, Hence the Fibonacci Extension levels can be drown when the retracement of the recent impulsive swing has terminated. The deepest price retracement level is the price point where the complete price range of the recent impulsive swing gets plotted on to show hidden Support/ Resistance levels. Important Fibonacci Extension levels are the 61.80 % Extension and the 100 % Extension. A minor Fibonacci Extension level is the 161 % level.

The Fibonacci Retracement gets employed first to find important price retracement levels when a recent swing is getting retraced whereby the Fibonacci Extension gets employed when the retracement terminates and a new impulsive leg starts to find important hidden support/ resistance.


On the 1 hour chart below we see that the 100 % Fibonacci Extension from the first leg down plotted on the beginning of the next leg down marks the price zone, where the EUR/USD found hidden Support after market breached the daily S2 Pivot.

1 hour Fibonacci Extension

On the 5 min chart below the 61.80 % Fibonacci Retracement provided resistance to the price retracement of the larger leg down (blue arrow). Further, the leg down consists of three minor swings/ waves down,  whereby momentum was fading away with every new swing. The retracement of the first leg down started at the daily support level (pink line) after market failed to break the daily S2 Pivot.

5 min Fibonacci Retracement

Triangle Consolidation Pattern

Triangle patterns

Typical Triangle Consolidation pattern

Consolidation price zone

On the 5 min chart below we see the large triangle consolidation pattern, which got broken to the downside.
The market price of the EUR/USD moved down to the 61.80 % Fibonacci Extension and started a retracement back into the triangle consolidation price zone.

The Consolidation price zone of a recent consolidation pattern often acts as Resistance/ Support when market price retraces back into this price zone for the first time. So, the Euro retraced back up into the triangle consolidation price zone and market price rolled over to the downside most probably due to the recent consolidation chart pattern.

The Euro terminated its retracement and started its second leg down. The following typical three market swing consolidation pattern  between 11 a.m. and 1 p.m. GMT took as usual more time then the prior impulsive leg and the consolidation pattern also consists of three market swings. The consolidation pattern terminated after the third market swing of the consolidation pattern and market price continued its move down to the major Support zone of the monthly Pivot and daily S2 Pivot, from where market price finally bounced back to the upside.

5 min Triangle Consolidation Chart Pattern

Another Example of a Triangle Breakout 

Butterfly sell chart pattern on 5 min chart

The Triangle breakout

occurred with the beginning of the new hourly candle after the previous hourly candle closed exactly at the downward sloping upper resistance trend line of the triangle (Breakout Timing - red thick circle).

The Euro found resistance at the daily R1, which coincided with the 161 % butterfly sell pattern on the 5 min chart below. The Euro retraced down close to the typical 161 % Butterfly sell "book" target of this reversal pattern, which coincided with the daily Pivot Point.

The Fibonacci Analysis allowed to figure out support and resistance zones on the EUR/USD. The green ellipses mark Consolidation and Continuation patterns. If price retraces back into the price zone of the prior consolidation pattern then market price often temporarily finds Resistance/ Support at these chart price levels.

1 hour Triangle Breakout

5 min Butterfly sell pattern

Next Example from June 2012: Triangle Consolidation 

1 hour Triangle Breakout

On the hourly chart we see that the Euro formed a nice 3 wave triangle consolidation pattern (red triangle) after the explosive up move out of the ending diagonal triangle (blue lines). After the consolidation terminated the Euro slowly moved up from the daily pivot point (no confirmed close below it) supported by the 20 SMA (purple line)  and later by the 10 SMA (red line). Market respected (closed at) the weekly pivot at 12 a.m.GMT before the Euro broke through it at the beginning of the 2 p.m. hourly candle. Market moved up to the resistance zone at about 1.25 due to the 61.80 % fib retracement (swing down from 28th to June 1st), the previous low of May 25th (pink line), the 61.80 % fib extension (A-B at C), the 200 SMA and the daily R1. Market could not break this resistance zone so far.

Triangle Pattern in the EURUSD

1 hour Triangle pattern

On the hourly chart we had a nice triangle consolidation (blue lines) after yesterdays drop down, which, as mostly, is a continuation pattern. The triangle pattern took place at the 100 % fib extension at about 1.2706 from the prior wave down.
The triangle breakout occurred in today's European Session and it took out the prior low (minimum target of the triangle).
The weekly S3, the daily S2 and the 61.80 % fib extension at 1.2641 could provide some support.

5 min Chart Analysis 

On the 5 min chart we see that the 100 % fib extension from wave A-B at C at about 1.2756 acted as resistance yesterday. Furthermore, the sharp drop in price yesterday (D-1.2688) found support at the prior consolidation.

The breakout of the triangle occurred shortly after market touched (respected) the blue support line at 10 a.m. GMT (hourly candle). After the touch of the hourly candle the triangle support line got weaker and the break occurred in the beginning of the next hourly candle (11 a.m. GMT).
After market respected a level with the touch of a candle (particularly when the candle closed at this support/ resistance level) the next candle has the chance to break through this level either for a true breakout or for stop fishing the stops placed below the support/resistance (Timing).

The breakout candle on the 5 min chart at 12:25 a.m. GMT fished the stops placed below the recent low and daily S1. However, there was no close of the succeeding candles below the range of the breakout candle (no confirmation, so mainly stop fishing).

Clearing of stop and limit orders

Forex Stop Running

Stop and limit order clearing through false breakouts

Today, in the Asian session the Euro triggered/ cleared the stop and limit orders above the high of last week and then started to retrace back at the daily 61.80 % fib retracement and the weekly 10 SMA.


The solely clearing of stop and limit orders at striking price points like market lows and highs is a typical manipulative market behavior and price target of the Forex Manipulators particularly at the first test of these levels with all the stop and limit orders there - false breakouts/ non confirmation.

Daily 61.80 % Fibonacci Retracement

On the 5 min chart (below) we had two pin bars which closed in the price range of the preceding 5 min candle (price rejection/ non-confirmation). Both pin bars led to a reversal, whereby the first pin bar cleared the stops below the recent low which often increases the chance of a price reversal - stop clearing accomplished.

We also had a kind of Head and Shoulders pattern on the 5 min chart. The market reached the Head and Shoulders target (neckline is the brown line).

5 min pin bar, Head and Shoulder

Stop Runs during News release

News releases in Forex

Stop Running

Stop run (shakeout) to the upside after daily bull flag got triggered and market took out the recent daily high. The Euro found resistance at the low of June 28 at 1.2407 and the weekly 10 SMA at 1.2409. After taking out the stops above the high of July 27 at 1.2390 the Euro reversed strongly (Stop clearing accomplished...). The Euro currently found some support at the daily S2, the 38.20 % fib extension from the recent hourly swing down (not shown) and the price zone of the consolidation from the 26th of July.

Yesterday, we had a potential H&S (tricky pattern) on the hourly time frame.

Particularly on the 1 min chart we see how the Fibonacci study could help to anticipate support and resistance.

1-hour Euro US Dollar Chart Analysis

5 min Eur/Usd Dollar Chart Analysis

1 min Euro Dollar Chart Analysis

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