Bearish Failure – Forex Academy

Description

The GBPCHF cross in its 4-hour chart exposes a bearish sequence that shows bullish reversion signals and could pop-up in the following trading sessions.

The cross started its short-term downtrend on June 05th, when the price action topped at 1.2259 and confirmed the bearish bias of market participants on June 08th when the price action declined developing an engulfing formation. Once the cross bottomed at 1.1630 on June 29th, the price bounced until the previous highs zone reaching an intraday advance to 1.1712. The subsequent drop above the last lower low and the following bounce observed on the June 30th session, which reached a new higher high lead us to expect further upside.

The retrace toward 1.1714 could provide an opportunity to incorporate on the long side with a short-term target placed at 1.1837. This level coincides with the previous swing highs where the price should find resistance before to confirm a rally continuation.

On the other hand, the breakout over the descending trendline observed both the price chart and the RSI oscillator lead us to confirm the possibility of our bullish scenario.

The invalidation level of our trade setup locates at 1.1649.

Chart

Trading Plan Summary

Entry Level: 1.1714
Protective Stop: 1.1649
Profit Target: 1.1844
Risk/Reward Ratio: 2
Position Size: 0.01 lot per $1,000 in trading account.

Description

The GBPAUD cross in its 2-hour chart exposes an upward advance after the price developed a new lower low in the Tuesday 23rd trading session. The price found an intraday bottom at 1.79997 from where the price recovered erasing the Tuesday losses climbing until level 1.80910.

The price action suggests the structure as a bearish failure, which is confirmed by the bullish breakout observed in the RSI oscillator. On the other hand, the RSI illustrates a sequence on lower highs while the price developed a lower lows series, which corresponds to a bullish divergence. This divergence leads us to conclude that the downtrend developed by the GBPAUD is in an exhaustion stage, and a bullish reversal is imminent.

The breakout over the recent swing high at 1.8066 makes us foresee further upsides until the zone of 1.8236. The invalidation level of our bullish scenario locates at 1.8015.