We aren’t quite there yet, but a topping pattern – ‘Head-and-shoulders’ – is coming more and more into focus with each passing day. The beginning of the pending pattern starts back in early August with the development of a ‘left shoulder’, the ‘head’ came early September upon a failure at the 2012 low, and now we are left waiting for a ‘right shoulder’ to fully form. It may have already done-so with the turn down from 11880. To make the pattern official, though, we not only need the ‘right shoulder’ to solidify but also see a daily closing bar below the ‘neckline’.
The 'measured move' target on a clean break of the 'neckline' is derived by taking the height of the pattern and subtracting it from the ‘neckline’. This method points to a target in the mid-11200s. This would take EURUSD a good distance back into the range from 2015-2017, so it’s possible if it's to eventually trade much higher, broadly speaking, that a move lower may be truncated and not reach the end-target. But this doesn’t mean there still isn’t a good risk/reward opportunity here brewing. Swing-traders can operate off the daily chart, and for those trading shorter-term time-frames (i.e 4-hr or less), a confirmed break can be used to help shape trades by following the path of least resisistance.
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An update will be provided should we get the confirmation we’re looking for. To follow along as price action progresses, you can join me on Wednesdays and Fridays for the “London FX & CFD Trading” webinars. For details, check out the Webinar Calendar.
Entry: Daily close below the neckline.
Stop: Above the neckline.
Target: Measured move target = ~11250
---Written by Paul Robinson, Market Analyst
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