What usually occurs after you spot a head and shoulders pattern? A breakout, of course! Yesterday, EUR/USD dropped like a rock after it had formed a very visible head and shoulders pattern on the 1-hour chart. If you were unable to jump in and sell the pair, then don’t ya worry, because EUR/USD looks like it is revving up for another move down. As you can see, EUR/USD has managed to make its way back to the broken neckline support. This could be a good chance for the latecomers to sell the reversal!
Speaking of reversals, USD/CHF seems to be in the middle of one. The pair, after consolidating for three whole days just above .8300, popped up yesterday and formed a bullish engulfing candle on the daily . Could this mean that the downtrend is over? If you’re REALLY bullish on the pair and want to risk it, now is a great time to buy. Do be careful of the .8550 level though, as it served as support before. Once price passes through a major support level, that level usually becomes resistance.
Of course, what’s a Big Pippin update without a lovely Fibonacci retracement setup? If you look at the 4-hour chart of USD/JPY, you’ll see that the pair is on retracement mode as it makes its way to the 50% Fibonacci retracement level. With the Stochastic about to hit overbought territory, we could see the pair continue with its downtrend soon. Watch the 50% Fib carefully folks, as it could very well serve as a major resistance level!
To get the complete picture and avoid getting blindsided by economic data, you also have to do your fundamental analysis.