AUD/CAD forming a 3-wave zigzag pattern which is generally labelled ABC with 5-3-5 sub waves. See picture below for an example.
The flag has now been broken and can enter short if it retests or once 50 EMA crosses below 200 EMA. AUD/CAD should then find the last of the wave towards the daily 200 EMA.
- Price holding below the 200 EMA
- Price holding below the 50 EMA
- 4 – Hour below 50 EMA
- Retest back to the lower trend line of flag would present a great risk to reward entry short.
Support – 0.94530, 0.94030
Resistance – 0.95325, 50 EMA, 200 EMA
Optimal entry provides the greatest reward to risk ratio while supporting entry is a zone for reversal signals.
Optimal Entry – 0.95240
Supporting Entry – 50 EMA crosses below 200 EMA
Candle Reversals for entry
- Bearish Shooting Star
- Bearish Engulfing
- Bearish Dark Cloud Cover
As traders, it is your job to mitigate the risk and only trade structures that provide high probability and great reward to risk ratios.
If you are not comfortable with defined exit levels, experiment with Moving Averages to help set solid exit rules to protect your capital.
IF: Price breaks above 0.95625 level and violates 200 EMA– this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.
Reward / Reward Targets:
Optimal Entry 0.95240 – Target 1 0.94030 = Reward to Risk
Optimal Entry 0.95240 – Target 2 0.92880 = 6x Reward to Risk