In today’s lesson, we are going to demonstrate a chart where the price makes a strong bearish move from a Fibonacci level. It has two messages, which we will find out soon. Let us get started with the chart’s price action.
The chart shows that the price makes a strong bearish move. The last candle comes out as a long bearish candle, which states that the sellers dominate over the buyers. Traders may want to wait for the price to make a bullish correction to go short in the pair with more aggression.
The chart produces a bullish inside bar. The sellers are to keep their eyes on the pair to get a bearish reversal candle to go short. It seems that the pair may produce a strong bearish reversal candle (the signal candle) soon.
The chart produces a bearish inside bar, which is not the sellers’ favorite to go short. The price makes a little bearish move and heads towards the North again. Look at the last candle in the chart. It comes out as a bearish engulfing candle, which is one of the strongest bearish reversal candles.
As expected, the bearish engulfing candle drives the price towards the South. The sellers on the minor chart are going short. Thus, the price is about to make a breakout at the last swing low on the chart as well.
The price makes a breakout at the last swing low and heads towards the South further. Then, it produces two bullish candles in between but continues its bearish journey again. The price may have found its support since it produces four consecutive bullish candles. The price may continue its bearish journey, or it may make a bullish reversal. The bull looks good here. Let us draw Fibonacci levels and see whether it gives us a clue about the trend continuation or a reversal.
The chart produces a bullish inside bar right at 138.2 level. Please note that the price makes its bearish move from 78.6 level. The level of 78.6 has a strong relation with 138.2. If the price trends from 78.6, it often makes a reversal at 138.2. This is what happens here.
To sum up, if we learn the art of using Fibonacci levels and understand how a level is related to others, it becomes easy for us to take trading decisions such as entry, exit, and taking a partial profit. In the end, it makes us prolific traders.