After an impressive rally, the GBPCAD chart is beginning to display divergence in what might turn out to be a 3 drives to a top style pattern
GBPCAD chart 4 hour
Let me say defensively, that while some of the minor trends inside this pattern do find Fibonacci levels, it does not comply with the perfect Fibonacci symmetry the text books often require. For me this is not an issue. This is a pattern that indicates loss of momentum after a strong trend which is a situation that can often precede a reversal.
The trend line across the 3 drives provides a visual indication of falling momentum. It's considerably flatter than the trend leading into the pattern. For good measure, the RSI tells the same story. It's beginning to make lower highs while price is still making higher highs. Encouragingly, this divergence is starting from the RSI's overbought zone, well above 70%.
As with most reversal patterns, this one is not completed until price drops below the pattern support. One approach to this is to use the minor dashed support line as an indication of this. For good measure a breach of this line, this would also represent a move below the 20 period moving average.
A typical approach to the initial stop would be to place it above the peak of the 3rd drive. If this is taken out, the reversal has failed
There is no set up if price simply rallies from current levels and moves above the third drive without taking the support out.