Chart trading is about identifying potential set ups and then waiting to see if they are triggered. Some are, a lot aren’t. The Aussie Dollar and Dow are both on my watch list this week

US 30 Head and Shoulder

On paper, this looks like a quiet week for US markets with not much on the economic calendar and Thanksgiving on Thursday

As we all know though, markets have a habit of doing the opposite to what’s expected. This potential head and shoulder in US 30 looks worth monitoring as a sign things could take a sudden turn for the worse.

From here, a clear break below the neck line would complete a bearish head and shoulder pattern. On the other hand, if the market moves far above last Thursday’s high, there will be no right shoulder and the pattern will be negated.

US 30 had a large, low volatility rally before it started to flatten out and form this pattern. That means there’s plenty of scope for a high volatility, steep correction. We’ve recently seen this happen in the Japan 225. The MACD is also flashing a warning signal, trending down after showing bearish divergence with price

Aussie Dollar turning point

Aussie is approaching a possible harmonic point around 75c.

The move down from .8125 has consisted of 2 separate swings, each made up of 5 waves. At around 75c the AB and CD swings will be the same size. I have used the Fibonacci price tool (blue) to project the level where AB = CD

75c is also a 78.6% Fibonacci retracement of the major rally from .7392 to .8125. This is the last of the major Fibonacci retracement levels and is a common turning point.

For harmonic traders, any trend change in the vicinity of 75c could be a significant turning point. For longer term traders, the daily candles making higher lows and highs would be an indication of trend change. Shorter term traders might look for signs of trend change around this level using lower timeframe charts like the 4 or 1 hour to identify basing patterns or other signs of a potential move higher

If price just keeps falling through the 75c vicinity with no trend change there is no set up.