Many currencies made substantial moves over the past week. Although much of this was caused by the dollar sliding, these moves could also be seen on other crosses. We suggested that a period of large moves like we saw last week has a good chance of producing solid market symmetry later.
The EUR/CHF chart is an example of the excellent symmetry that we anticipated. There are several patterns forming, but we will only analyze the two we feel are most important for our feature. We will be going over a bearish Gartley/double top and a bullish butterfly.
First we will go over the bearish Gartley/double top. We are looking to sell the EUR/CHF if it rises to 1.5445 at point D. Point D is located at the convergence of the following points:
- 100% Fibonacci retracement of XA
- 161.8% Fibonacci extension of BC
- AB=CD
- Double top
- If RSI rises above 70
We would place our stop for the bearish Gartley/double top at 1.5476. Our initial profit targets would be 1.5400 (38.2% of CD) and 1.5358 (61.8% of CD). The trade is invalid if the pair drops below 1.5250 before reaching the entry.
Now we will go over the bullish butterfly. We are looking to buy the EUR/CHF if it falls to 1.5187 at point D. Point D is located at the convergence of the following points:
- 127.2% Fibonacci extension of XA
- 127.2% Fibonacci extension of BC
- AB=CD
- If RSI falls below 30
We would place our stop for the bullish butterfly at 1.5147. Our initial profit targets would be 1.5247 (38.2% of CD) and 1.5298 (61.8% of CD). The trade is invalid if the pair rises above 1.5380 before reaching the entry.
We do not know if the pair will move up or down from where it is now. We are simply saying we will sell if it rises to 1.5445, and we will buy if it falls to 1.5187. As always, we will watch for long bars in the CD leg of either pattern assuming one of them completes over the course of the next day. If we see long bars in the CD leg, or if the pattern accelerates into the entry, we will cancel the trade.
By Bradley W. Gareiss of GFTForex.com
