Talking Points:

  • Strange Diamond Pattern in NZD/CHF
  • Key Zone for Initiating New Short Positions
  • Mixed Short-Term Signals to Contend with

Trading within ranges amidst irregular patterns appears to be the flavor of the week, and staying with that theme, the weekly chart of NZDCHF currently shows one of the oddest looking diamond patterns seen in recent memory.

Guest Commentary: Weekly Diamond Pattern in NZD/CHF

An odd diamond pattern on the weekly chart of NZD/CHF could give way to a continuation of the prevailing downtrend.

Of course, skeptics could simply focus on the triangle portion, which is the second half of the diamond formation. As seen above, it is clear enough and is relatively uncontroversial in comparison. From an analytical standpoint, it will not make too great a difference.

The daily chart below indicates resistance overhead, as price begins an extension move upwards. All that remains is to identify a logical zone of resistance where new short trades can be initiated. This will be in line with the weekly chart's downward trend, which means that overall risk profile should certainly be in order.

Guest Commentary: NZD/CHF Trading Near Overhead Resistance

The daily chart of NZD/CHF shows trend line resistance immediately overhead from current prices.

The actual resistance zone is derived on the four-hour chart below, as is customary for trades taken on the hourly time frame. Price action has been somewhat messy on the four-hour chart, but the final zone of resistance is ultimately identifies as 0.7503-0.7542. Price has yet to reach this zone, which should leave traders plenty of time to prepare for a possible entry.

Guest Commentary: Key Zone for Selling NZD/CHF

The 4-hour chart of NZD/CHF is used to identify the key resistance zone for initiating new short positions in the pair.

The hourly chart actually shows some mixed signals for this trade. In particular, there has been some bullish price action of late. However, this is tempered by the hidden line of support turned overhead resistance. With some luck, which is always helpful in consolidating markets, this level will continue to hold.

Guest Commentary: Mixed Signals on NZD/CHF Hourly Chart

Bullish recent price action on the hourly chart of NZD/CHF could act as a barrier to this potential short set-up.

As usual, the ideal trade triggers would be bearish reversal divergence, pin bars, and/or bearish engulfing patterns on the hourly chart. With the weekly trend potentially resuming from here, it is definitely worth taking two or three tries at getting in on this trade. The risk zone is less than 40 pips wide afterall, and an hourly entry will likely provide stop losses in the 15- to 20-pip range.

By Kaye Lee, private fund trader and head trader consultant,