Crude oil prices have been on a tear these days so I’ve got a long Loonie bias. Here’s a simple reversal setup I’ve spotted on EUR/CAD’s 1-hour time frame.
As you can see from the chart below, price formed a double top after failing in its last two attempts to break above the 1.4750 minor psychological mark. The pair just broke below the neckline around 1.4550 when the BOC decided to keep interest rates unchanged and give a somewhat neutral statement.
Zooming out to the longer-term time frames reveals that this reversal pattern is right around the longer-term descending trend line resistance and an area of interest, so a break lower could signal additional bearish momentum. With this short position, I’m aiming for the recent lows around the 1.4200 handle.
I’ve decided to set my stop past the tops, trend line, and the 1.4800 major psychological handle to give me room to cut losses if price action goes against my trade. There are no reports due from both the euro zone and Canada for the rest of the week so I’m thinking the ongoing trend could carry on. Here’s what I got:
Short EUR/CAD at market (1.4550), stop loss at 1.4825, profit target at 1.4225 for a potential 1.2-to-1 R:R. I’ve risked only 0.25% of my account on this trade since I’ve already got another trade open this week. Make sure you read our risk disclosure if you’re joining me!
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