y Michael McCarthy, Chief Market Strategist, CMC Markets Australia
Uncertainty, ambiguity, approximation – all part of the traders’ world. So when a chart signal sets up perfectly it’s often welcomed as a small dose of clear instruction from the market. And the “W” reversal in AUD/CAD is as good as it gets.
The chart shows the action. The double bottom gives the points of the “W”. Note how the first falls outside the Bollinger Bands, the second within. This is a key requirement for the pattern, and combined with the narrowing of the BBs shows volatility is lower – the (theoretical) signal that the turning point is passed. Strictly speaking the breakout occurs at the close of the blue candle immediately after the second low point.