By Adam Harris, Trade With Precision
Today I’ll be covering three trading setups on my watchlist: two bullish indices, and one bearish currency pair.
My colleague, Toby Genaro posted a video on Tuesday about the bullish US indices and illustrated the pending opportunities currently setting up in these markets. (found here: https://www.cmcmarkets.com/en-au/news-and-analysis/us-indices-on-the-up)
So, it should come as no surprise that two of the trading opportunities I am stalking today are setups in these markets and are close to printing at the time of writing. Toby covered the bigger picture aspect as well, while I will focus purely on the trigger chart and specific candle that I can see forming.
There are two setups unfolding currently, starting off with the NASDAQ 100 on the Daily timeframe:
Looking at the chart below, a medium-sized candle formed yesterday in the Buy Zone, the zone between the 10 and 20 period moving average. The lows of the previous red candle is a good place for my stop-loss, and it also touches on a previous swing-high. The monthly and weekly charts are both trending upwards, and although there is potentially some resistance at the 7,000 level, the real target is 7,200, which would offer me a reasonable reward-to-risk.My trading plan would be to split my risk across two orders, with half my risk on each. One order would have a fixed 1:1 take profit target, while the remaining order would be set for 7,195 and I would then use discretion in trailing the stop-loss behind each daily candle.
Moving on to the next chart, the daily Japan 225, this is busy producing a small bullish candle, which is close to a Buy Zone. I would prefer for it to actually connect with the 10 day Moving Average (MA). However, judging by the strong setups occurring in other US Indices, this is likely the setup candle. Similar to the NDAQ 100, there is potential resistance nearby, this time at 23,000, with the ultimate profit target at 24,000. I would approach this potential trade with the same split order and risk management strategy as outlined for the NDAQ 100 setup.Now, having a look at EUR/AUD. What I like most about this is the bearish momentum. As can be seen on the Weekly timeframe chart below, we have a downtrend, with price having broken recent support at 1.5775, and now en route to the next level of 1.5650.Once I move down to the Daily timeframe chart, we can see the bearish momentum of the downtrend continued and with a particularly strong move today. On this chart, it’s much easier to see the breakthrough of recent support at 1.5775. This is where I’ll be stalking and waiting for price to retest this area for resistance in the coming hours and days.
Finally, moving down the the Four-hourly timeframe, we can see price is bearish with strong downward momentum. At the time of writing, there is a bullish rejection candle at the bottom of the move, which may form a swing low and begin price’s retracement back up into the Sell Zone.
I measured a Fibonacci retracement from this point. Note that the 38.2 percent and 50 percent retracement levels are on either side of the 1.5775 level, which highlights my sweet spot. I will be waiting there for a small bearish rejection candle to form, ideally right up against the level, allowing me to get additional stop-loss protection above this S/R level. My entry would then be on the break of the low of this candle.
My risk and trade managament would be identical to the above trades, looking to scale out and bank any potential profits at 1:1.
As always, I will give these positions every opportinuty to reach their targets, while protecting my capital.