Hi traders, hope you're all having a good weekend.
We have a potential setup forming for AUD/USD on the 4H chart with a breakdown trade.
This could be an excellent shorting opportunity. I have tested a few hypothetical trading scenarios that could come into play when the FX market opens later. Each time, I have got over an 1:2 Risk to Reward.
When analyzing the pair, I discovered that price seems to react when it hits specific technical levels. Each time price hits the sideways resistance, it seems to test the resistance, and price stalls, and falls into the lows. I then zoomed out on my chart, and drew the line acting as sideways resistance further back. I was surprised to discover that the sideways resistance line I'd drawn had been having a strong affect on price for a very long time (Since May 2017).
With this information, I now knew that the sideways resistance line I'd discovered was more likely to be reliable, because it had been having an affect on price for a long time. I then discovered that price is currently at a horizontal support level as well, and is about to break the support level. If price breaks the horizontal support, coupled with the discovered sideways resistance, I believe these lines will act as a very strong resistance ceiling.
At the resistance line there is multiple reversal candlesticks showing weakness. And a clear Fibonacci retracement was hit. This further consolidates that we have hit a resistance level in play.
I am expecting a down move of 55-100 pips. If price is not affected by local support levels, it will achieve the full 100 pips. Only if a minor support affects price it will not achieve target.
Upon using a Stochastic indicator on this instrument, I discovered a strong hidden bearish divergence. I am personally not an indicator trader, but to those who do may find this information useful.
Do remember that price needs to open below the current price & support level, to be favorable to trade. So it is important to watch this trade carefully before considering a position.
I will be posting updates on this trade below as it progresses, so like & follow to keep at to date with this analysis.
If you have any questions or queries on this trade, feel free to connect.