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Falling Wedge on Weekly Chart of EUR/NZD

September 16, 2012 (Last updated on December 6, 2012) by

If you look at the weekly chart of the EUR/NZD currency pair you will easily spot a pattern known as a falling wedge. The current instance of the pattern is completely valid with 4 touches of the lower border and 3 touches of the upper border. It is a very long-term pattern that has started forming back in January of the the year 2011. Falling wedges are usually followed with bullish breakouts with a rather high chance of a false breakout or throwback.

The image below depicts the EUR/NZD wedge. The yellow lines show the borders of the pattern. The cyan line is the entry level that is calculated as 10% of the pattern’s height (which is varying, of course) added to the top border. I will use it to enter a long position and I will ignore any bearish breakouts. The profit target is given as the highest point of the formed wedge and is marked with a green line on the image. My stop-loss will be set to the low of the breakout candle of the W1 chart. Considering the timeframe of the pattern, it may take several months for the price to break out of it and more than a year to reach the take-profit level. A Forex trader should be careful before engaging oneself into such a long-term position, locking the margin for an extended period of time. You can click to enlarge:

EUR/NZD Falling Wedge on W1 as of 2012-09-16

You can also download my MetaTrader 4 chart template for this EUR/NZD pattern.

Update 2012-10-16: Long entry triggered at 1.60555 with stop-loss at 1.57880 and the fixed target of 1.95713.

Update 2012-10-25: Stop-loss got triggered as planned at 1.57880. Looks like I have been caught with a false breakout, even with my 10% “buffer zone”.

Update 2012-10-25 #2: Just noticed that my entry level was placed at the border (yellow line) instead of the “buffer zone” (cyan line). Oh well, got to hate losing to wrongly entered data…

Update 2012-12-03 08:15 GMT: Unfortunately, missed the entry on breakout, which occurred about 10 hours ago. Set a buy-limit pending order to catch it on pull-back. Entry price set to 1.5868.

Update 2012-12-03 11:48 GMT: Long position triggered on pull-back to my buy-limit order about 25 minutes ago. Stop-loss set to 1.5586 and take-profit — to 1.9571 (quite an insane reward/risk ratio.)

Update 2012-12-06 16:23 GMT: Got stopped out more than an hour ago. No slippage. I guess the pattern is done. I do not see the breakout spike as a new high point of the falling wedge. Well, there will be other patterns…

If you have any questions or comments regarding this EUR/NZD chart pattern, please feel free to reply via the form below.

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