Market Condition: Pending Breakout
Target 1: 2x ATR .7095
Target 2: 4x ATR .7293
Invalidation: 1X ATR at .6798
NZDUSD 1Day Chart
(Created using Marketscope 2.0 Charts)
The NZDUSD has advanced as much as 701 pips for the 2015 low at.6196. As the pair continues its advance, traders may begin planning to enter the market on new higher highs. The current October high for the pair resides at .6897, this high now denotes resistance for the current uptrend, and traders can plan to enter into the market on a breakout above this value. In the event of a breakout, ATR can then be used to measure potential take profit points. Currently, daily ATR measures 99 pips. Using 2x daily ATR, initial targets for the NZDUSD would be located at .7095. While traders looking for a 4x ATR extensions can begin targeting a price of .7293.
When trading a breakout above resistance, traders should have a plan in the event prices turn against them. In this example, traders may look to manage risk by placing a stop 1x ATR below current resistance at a price of .6798. At this point any bullish breakouts would be considered at least temporarily invalidated. It should also be mentioned that if prices fail to breakout above the monthly high, it may also signal an end to the bullish market conditions. In this scenario, any pending entry orders to buy the NZDUSD may be reevaluated.
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