Never miss a story from Kaye Lee

Subscribe to recieve updates on publications
Please enter valid First Name
Please fill out this field.
Please enter valid Last Name
Please fill out this field.
Please enter valid email
Please fill out this field.
Please select a country

I’d like to receive information from Daily FX and IG about trading opportunities and their products and services via email.

Please fill out this field.

Your Forecast Is Headed to Your Inbox

But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk.

Your demo is preloaded with £10,000 virtual funds, which you can use to trade over 10,000 live global markets.

We'll email you login details shortly.

Learn More about Your Demo

You are subscribed to Kaye Lee

You can manage you subscriptions by following the link in the footer of each email you will receive

An error occurred submitting your form.
Please try again later.

Talking Points:

  • Consolidation Pattern on GBP/CAD Daily Chart
  • Favorable Risk/Reward Profile
  • Gartley Pattern Helps Validate the Trade

The usual procedure for trading trends is to wait for a legitimate pullback in an uptrend or downtrend, and there is a definite uptrend on the below daily chart of GBPCAD that is only just beginning to pull back.

Guest Commentary: Pullback in an Overall GBP/CAD Uptrend

Gartley-Validated_Intraday_Set-up_in_GBPCAD_body_GuestCommentary_KayeLee_January16A_1.png, Gartley-Validated Intraday Set-up in GBP/CAD

There are pros and cons to taking this trade when viewed from the higher time frames. The definite con is that price has largely moved sideways and hasn’t really given sufficient room for a trade, which suggests that in order to make for suitable risk/reward profile, a much lower time frame is needed.

However, this recent consolidation suggests that a battle between bulls and bears is happening on the lower time frames, and that may well provide enough of a range to justify a low-risk trade.

The four-hour chart below provides a better picture of the range, which appears to be steady and tradable. Even if price only rises to the top of the range, there are approximately 195 pips between the current price and overhead resistance.

Guest Commentary: 4-Hour Range in GBP/CAD

Gartley-Validated_Intraday_Set-up_in_GBPCAD_body_GuestCommentary_KayeLee_January16A_2.png, Gartley-Validated Intraday Set-up in GBP/CAD

On the downside, the support region is about 60 pips wide. This makes for attractive risk/reward, especially when considering that the uptrend on the higher time frames could resume as well.

The hourly chart below shows a harmonic pattern that lends credence to this trade, the Gartley pattern. (The rules for trading Gartley patterns were described in a previous article.)

See also: A Credible Gartley Pattern in EUR/GBP

Although price has come very close to touching the 78.6% retracement level, it’s important to be strict with regard to support levels. This retracement level will only become tradable once price has actually touched it. Thus, the support zone emerges as 1.7768-1.7826.

Guest Commentary: Gartley Pattern on GBP/CAD Hourly Chart

Gartley-Validated_Intraday_Set-up_in_GBPCAD_body_GuestCommentary_KayeLee_January16A_3.png, Gartley-Validated Intraday Set-up in GBP/CAD

Nonetheless, some traders may choose to be aggressive and use pin bars, bullish engulfing patterns, and/or bullish reversal divergence on the 15-minute chart as trade triggers.

As always, two or three tries may be needed to get in on this trend. The decision to wait for the support zone to be validated may result in missing this trade, but experience suggests this is unlikely.

An examination of the 61.8% level shows that it was slightly breached, and often, this also means that a breach of the 78.6% level will occur before price turns around.

By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com