Monday, July 29
Analysis
The London trading session took place inside a broad bear channel, so both longs and shorts could be entered. The session put in its high on the first bar of the day at 3am, which was a retest of the bar 58 low. The price action between bars 7 and 37 was somewhat confusing. On one hand it was a simple wedge, with the tops being bars 8, 19, and 27. But then the market wanted to turn the third push into the spike of a spike and channel bull trend, which they essentially did, but the two pushes of the channel were the not-so-impressive bars 31 and 37. The bulls that shorted the top of the wedge may have been worried that the wedge was getting its two-legged correction with bars 28 and 34. Some weak bulls may have exited as bar 37 went above the high of the prior bar. However, these two legs failed to reach the bottom of the wedge by 4 pips or so, so odds were that there was still room to fall. The appropriate stop loss for shorts was above the bar 1 beginning of the spike. This would have protected against the possibility of the price reaching the top of the channel. In any case, London session traders didn’t have the opportunity to trade the actual top of the wedge around bar 30, as the session only began at bar 37.
There was a barbwire trading range from bars 41 to 45, which usually is a final flag. The reversal trade could have been entered as bar 51 went above the high of the prior bar. Traders that were waiting for a reversal bar got one at bars 56 and 58.
The bull trend which followed was relatively tight, and provided no real pullbacks for would-be late-entry bulls to get in on the action. When the trend reached the top of the channel, the bar 81 reversal bar was the first bear bar in almost 10 bars which should give traders pause. Though it was a wedge top that occurred at the top of the broader bear channel and at a previously established level of resistance (based on the bar 59 low), so was still an acceptable short.
When the price then dropped in a strong spike for 7 candles, traders should have looked for opportunities to enter if they weren’t already short. There was a low 1 at bar 89 and a low 2 (or close enough) at the moving average at bar 102, and another low 2 at bar 114, all of which made for good short entry trades.