Butterfly at Major Resistance Zone, Major Falling Trendline, Short USDCHF, 14th November 2016

USDCHF D1, Major Falling Trendline, Major Resistance Zone

USDCHF H1, Butterfly Pattern, FR161.8%

Technical Analysis:
USDCHF has reached a major resistance zone and resisted by a major falling trendline, signaling for a probable reversal or a major retracement.
A butterfly was formed at the same time and completed at FR161.8% within the major resistance zone, increasing the probability of a reversal.
Market Sentiment:
the market will still be uncertain for the time being after Trump has emerged as the President. The dollar has gained significantly and may face exhaustion soon.
Trading Plan:
Short with 1/2 risk as market just opened and execution is not within market hours
Stop loss was set 20 pips above FR161.8%.
First TP is seen at the bottom of a probable retracement channel that may allow the price to resume appreciation.
Second TP is set around FR88.6%, about the whole wave of the extended retracement and the final TP is seen at FR1618% where there is a key support level
USDCHF M15, Trading Plan

The price hit stop loss after making another wave of retracement/appreciation.
Result: Loss 1.65%USDCHF.M15 20161114 result.png
It was good that I stick to my risk management not to enter full risk when:

  • Execution is not within market hours
  • When market just opened on a Monday and before 5pm

That save me another 1/2 risk and thus the loss was minimized.
However, I may want to reconsider how to determine the first wave of reversal. Honestly, it doesn’t look like a reversal but more like a retracement for another wave of appreciation.
Looking at the chart again, the butterfly was formed quite awkwardly as the first triangle was so much wider than the 2nd triangle, the retracement. Just compare it to another recent butterfly pattern on EURJPY and it becomes clear.

And come to think of it again, the first wave of reversal should come in a single wave. Therefore, it was my mistake to have mistaken a retracement as a wave of reversal.

Leave a Reply