EURUSD formation of inverted head and shoulder pattern – retracement before bullish movement continue?

EURUSD formation of inverted head and shoulder pattern – retracement before bullish movement continue?

4 May 2020 Mon (HK8:00am)

Queenie Wu                                  

Trading zone: Consider Support and resistance: 1.10301 – 1.08937 

Strategy: Wave trading between the key support and resistance levels.  Follow the trend direction in the higher timeframe and use the lower timeframe to enter.

Notice: Support and resistance levels are shown by the pivot indicators & the

Fibonacci retracement level

D1 Chart: We are close to the top of TMA channel, at strong resistance level 2. Candlesticks were getting weaker with long upper shadow formed on previous trading day (1 May).  Stochastic oscillator reached above 80.  Bearish reversal is likely to happen soon.

H4 Chart: We are close to the top of TMA channel!

Consider the hand drew zigzag line (in orange colour), we can see that an inverted HEAD & SHOULDER pattern is under formation.  Reversal indicator has already shown a red arrow.  Schaff Trend Cycle indicator has already touched the highest level.  Bearish reversal is likely to happen.

Following the right shoulder direction, a bearish movement is likely to happen today.  We can sell EURUSD

H1 Chart:  Reversal is happening already.  Ftrend indicator is now showing all timeframes are pointing to downward movement.

Continuation and same direction?  Yes.

Trend direction: use Identify trend indicator: DOWN in H1 chart

Expected direction: DOWN

Entry point: now SELL at 1.09572;

Exit point: H4: We can use Fibonacci retracement level (38.2% and 68.1%) to exit at TP1: 1.09072  TP2: 1.08398 (close to TMA channel floor)

SL: At 1.10188 (the top of the previous candle; close to the resistance level 2)

Be careful: Notice there may be a change in direction from Asian to London to US session.  If this happens, we have to TP immediately. 

Result: Today, the bearish movement is in progress

Conclusion:  For every trade, to name a few, we have to consider the following factors:

• the current position of the candlesticks compared to the S & R levels (天地人),
• the wave pattern of the candlesticks (波浪理論),
• the strength of the candlesticks (影線),
• the reversal pattern of the candlesticks (二龍),
• the continuation & same direction of the candlesticks (連貫性, 持續性),
• the direction changes among different trading sessions (時空理念),
• the confirmation of the start of the trend / reversal of the trend &
• the strength of the trend …..

EURUSD Daily

EURUSD H4: inverted head & shoulder pattern is under formation

EURUSD H1: bearish movement is in progress

Sell at 1.09572

Result: Prediction correct!  Bearish movement for the whole day