News

AUD:NZD Setup - Guest Post by DV 34

CMC Markets

If, like me, you appreciate the opportunity to learn from how other traders are seeing markets, I think you'll enjoy this clear analysis of the Aussie: Kiwi chart by our guest blogger DV 34.

AUDNZD ‘Crab in a Shark??!!’

Below is an unusual harmonic pattern setup involving two patterns and pivot points 

To disclose, I am currently long this pair… I have deliberately omitted my entries and stop levels to prevent others from trading this as they are not intended to be actionable trading ideas but rather to show examples in real time and for educational purposes only. 

For those who have read my previous posts, the first chart below should look familiar to you. If not, you can go back and look at my US dollar index post on 14th September for a better explanation. 

Basically I believe there could be a combination of two harmonic patterns within each other on AUD: NZD, they are called a ‘Shark’ and a ‘Crab’ pattern respectively. The names aren’t too important – as they are simply harmonic fibonacci patterns using set ratios. 

For those who do not know what they look like – these are examples according to the text books… (refer Scott Carneys work on harmonics, preferably from a library first…!)

While the weekly chart is currently showing a bullish shark, it is not quite a text book example, the saving grace for me however is the fact it closed at the 113% extension (which is the limit for a true shark pattern) and it rejected another fib extension exactly at 127%. This was also in a demand level with oversold indicators.

AUD: NZD - Weekly

The weekly emas are a good 200pips above current price leaving a blank space on the chart that has very little resistance on this timeframe

However, the daily chart below looks far more interesting… and what really caught my attention.

AUD: NZD - Daily

Effectively what we have here is a possible bullish daily Crab pattern inside a bullish weekly shark pattern. 

There are a couple of supporting points shown in this chart, namely:

-          A yearly S1 (support level 1) pivot point level clustering perfectly with the 361.8% extension of C-B at point D

-          A five wave decline noted by the dotted red lines, suggesting complete impulse move

-          The fact no candles closed below our PRZ (potential reversal zone) fib extension levels (yet!)

-          Price closing outside the 2std dev Bollinger bands and candles pausing

-          The oversold indicators 

In terms of targets it is reasonable to expect a short term rally to at least the 23.2 and 38.2% retracements of the C-D leg decline which is still within the white space shown on the weekly chart. 

The 38.2% retracement coincides perfectly with a fresh supply level and also the monthly pivot point, which could be an area where shorts become involved again around 126.40. This would also be around the weekly 10ema. 

While I usually like to keep things simple, in this case I added pivot points as they supported my trading idea and clustered with my already projected key levels.

I would suggest from my own experience that looking for new magic indicators or adding more indicators is rarely a good idea; they are merely secondary considerations supporting a trade idea and no more. 

Hope this helps, 

DV34


Sign up for market update emails