CAD CHF TREND LINE BREAK AS EXPECTED- BUT WHAT NEXT?
Having broken the Outer Uptrend Line as expected, the CAD CHF is now at a bit of a crossroads. The Double Tops that were formed were strong enough to lead to the bearish break, but may not be enough to push the pair down much farther. We could see the formation of a Range that eventually leads to the start of a downtrend, but if we see a strong Bull Candle above the Counter Trend Line (CTL) the Uptrend could continue.
Daily Chart below shows the breakout that took place below the Inner and Outer Trend Lines. Supporting this breakout were the Double Tops and the fact that we had rallied by 600 Pips, exceeding the Monthly Range for this pair.
Despite this break, the Double Tops seen here were too weak to start a significant downtrend. The first part of this pattern was strong, but the weakness of the candles for the 2nd `Top` rendered the signal too weak.
The candles shown here, however, are closer to what we would expect for Double Tops.
So what can we expect at this juncture? Well one of two options.
SCENARIO 1 - CONSOLIDATION ?
Since this breakout may not take place right away, the market could go into a period of Consolidation in the form of a Range. This is typically what you will see when the Monthly Range is hit and/or a Trend Change is going to take place.
DAILY CHART- RANGE SETUP?
We would see a rally to form the 2nd Support to complete the Range followed by a U-turn to breakout bearish. The new trend would be formed as the Swiss Franc regains lost ground against the Loonie.
SCENARIO 2 - RESUMPTION OF UPTREND ?
The Uptrend could actually resume with a simple Bullish Candle and break of the Counter Trend Line (CTL). Even though we are at the Monthly Range of the currency pair, trends can also continue once the setup and signals are strong enough.
Until the market shows us its cards, let's wait on the sidelines and then take appropriate action. Get familiar with how to trade these setups and then enjoy the Pips as they continue to roll in using my Methodology.
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