3-WAVE RULE DENIES BEARS ON CAD CHF
What looked like a promising bearish breakout has now turned Bullish with a sharp U-Turn that appears to have come out of thin air. However, based on our 3-Wave Rule of market trends, this pullback was always expected at some point in time.
Daily Chart below shows the strong Bull Candle that is now heading back to the broken Support barrier.
The cause of this reversal was the trend on the 4 Hour Chart. Several waves of bearish setups had led to that Daily Bearish Signal that broke the Range Support. However, pullbacks such as these are always to be expected to take place, making a short position an unwise one.
4 HOUR CHART
This technical aspect of trends can be seen across the Forex Market on all time frames. If there are several of these waves on a lower time frame, the immediate higher time frame will eventually pullback sharply.
In situations like these, we will either see a continuation of this rally that takes us back up to Resistance (False Consolidation Breakout Reversal)...
....or a U-Turn after testing Support to resume breakout...
In either case, the signal on the Daily Chart will have to be strong enough to justify entry such as the case with the GBP CAD trade (see Recent Trades).
Lets wait and see what unfolds.
In the meantime....