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Multitude of Channel Patterns

November 11, 2012 (Last updated on December 9, 2012) by

After a rather long period without any meaningful patterns, four channels on four different currency pairs will be available for trading during the coming week. The three of four patterns are formed on four-hour charts, which means that they should be monitored closely from the market opening tomorow. The daily chart pattern on USD/CAD is less demanding to the trader’s attention and may remain untriggered for days and weeks.

The channels themselves are marked with yellow dash-lines on all four charts below. The cyan lines mark entry points and are built by applying a buffer zone of 10% of the channel’s height. The green lines are profit targets for breakouts. They are built using 100% of channel’s height. I will apply stop-loss equal to the breakout bar’s high/low or, if the breakout bar traded inside the channel only briefly, the high/low of the previous bar.

It is the first chart pattern on AUD/CAD pair that I have spotted in my trading career. It is not a very popular currency cross, but it probably has some nice trading implications as a measure of China/US growth ratio. Anyway, the ascending channel pattern is a purely technical construct. In this case, the ascending channel appears inside an uptrend, so a breakout to the upside is to be expected. Unfortunately, it is not traded easily — the take-profit level will be constantly moving up, while the stop-loss should be adjusted as the channel’s upper border rises.

Update: It looks like I have confused the colors for the AUD/CAD chart below. The cyan lines mark the pattern’s borders here, while the yellow ones are the entry points.

AUD/CAD - Ascending Channel on H4 Chart as of 2012-11-11

You can also download my MetaTrader 4 chart template for this AUD/CAD pattern.

Descending channel on EUR/AUD @ H4 chart also appears inside a trend of the same direction. I would expect a downward breakout here. Bullish position should be traded with much care.

EUR/AUD - Descending Channel on H4 Chart as of 2012-11-11

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

EUR/GBP shows a classic case of a descending chart pattern. Its bullish trend is broken by this downwardly sloped channel on 4-hour timeframe and should continue once the breakout to the upside occurs. The bearish side of the pattern will probably result in fakeouts only.

EUR/GBP - Descending Channel on H4 Chart as of 2012-11-11

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

USD/CAD is in an ascending channel, which is to continue a long-term bearish trend started back in August 2011. Of course, the channel may also indicate a significant reversal in the trend. If it lasts for long enough to rise above the previous long-term lower high of 1.0444, the pattern should not be traded to the downside.

USD/CAD - Ascending Channel on D1 Chart as of 2012-11-11

You can also download my MetaTrader 4 chart template for this USD/CAD pattern.

Do remember to visit back to this post for updates on these trades’ execution.

Update 2012-11-12: The first trade triggered today. EUR/GBP broke through channel’s upper border (as expected). Since I have missed this entry point, I have used the ongoing pull-back to enter at 0.8010. Stop-loss set to 0.7987 and take-profit — at 0.8068.

Update 2012-11-13: EUR/GBP trade closed by stop-loss at 0.7897. It looks like a pull-back was the real deal. The breakout high may be a part of a new channel’s upper border.

Update 2012-11-14: EUR/GBP long re-entered on the new channel border breakout at 0.8015 with stop-loss at 0.7983 and take-profit at 0.8077:

EUR/GBP Re-Entry

Update 2012-11-14 17:32 GMT: EUR/AUD position triggered several hours ago. Like expected, it went bullish. The entry price is 1.2211, stop-loss — 1.2164, take-profit — 1.2302. Unfortunately, I have missed the entry for AUD/CAD drop. I have set up a limit sell order for now in case there comes a pull-back.

Update 2012-11-15 07:09 GMT: EUR/AUD long closed with profit about 7 hours ago at 1.2291. The exit price is lower than the original take-profit level as the sloping TP is moved down every 4 hours (it was a 4-hour chart pattern). It looks like AUD/CAD sell limit will not be hit — the currency pair has almost reached its target level. Too bad I have missed this entry. But Forex is Forex — should be happy with what I get.

Update 2012-11-15 12:18 GMT: AUD/CAD has hit its profit target 3 hours ago. Too bad I was not in this trade. Deleting the sell limit order now.

Update 2012-11-19 16:33 GMT: EUR/GBP position (that second entry) has reached its target less than an hour ago. Since the target level was sloped down, the take-profit at that moment was at 0.8053 (hit without slippage). The resulting profit compensated the failed first entry with profit/loss ratio at 1.66, which is not that bad, in my opinion. Talk about getting revenge on markets! So 3 out of 4 channel patterns have already traded. All three were profitable, but I have missed one, so that makes “only” two profitable trades for me and I hope more for you. USD/CAD @ D1 pattern is yet to trigger.

Update 2012-11-23 15:29 GMT: The last chart pattern got triggered. Short USD/CAD entry was executed at 0.9944 about 15 minutes ago. Downside breakout was expected here, so it is going according to a plan. Stop-loss is set to 0.9983 (yesterday’s high + spread), take-profit is set to 0.9792 but will be moved up every day.

Update 2012-12-09 23:08 GMT: USD/CAD short position closed below take-profit level on weekend gap down. Exit price is 0.9868, which is well above the initial take-profit level, but is slightly below the today’s TP as it was moved up everyday.

PS: It looks like all four channel patterns from this post resulted in profit. A great result, in my opinion.

If you have any questions or comments regarding the four analyzed channel patterns, please feel free to reply via the form below.

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