Is CAD/CHF Trying to Test the Resistance Level Again?
It seems CAD/CHF is trying to go up to test the 0.7741 resistance level once again. If it breaks above this level, it can form a strong uptrend.
This is how the CAD/CHF monthly time frame looks:
As you see on the above chart, CAD/CHF has been going down for several years (since 2007.11.01) and has formed a strong and long downtrend. Formation of the 2015.01.01 candlestick with its long lower shadow (the first red arrow on the above chart) and then moving sideways after that, can make you think that CAD/CHF is about to change the direction and go up, specially because the Canada’s economy is following the USA economy which is attracting more money after the USA elections.
Later on, the 2016.11.01 monthly candlestick formed that supported this reversal probability. Although the 2016.11.01 candlestick is not that strong, still its lower shadow and its close price which is above Bollinger Middle Band can be known as a good signal of reversal. However, it is still too early to decide and do anything. There are still a lot of things that have to happen before taking any actions by the traders and investors.
The weekly chart shows more details. There is a resistance level at 0.7741 that although it is not that strong, its breakout can result in forming of an uptrend.
The 2016.12.04 and 2016.12.11 weekly candlestick tested the 0.7741 resistance level, but then the market went down. However, it was stopped by Bollinger Middle Band, and so the 2016.12.25 candlestick formed a relatively long lower shadow above the middle band which is a good bullish signal.
Then, the next weekly candlestick (2017.01.01) closed with a bullish body which is the confirmation of 2016.12.25 candlestick and its lower shadow.
So, Bollinger Middle Band is working as a support and bulls are trying to take the control, and it seems they have been able to succeed so far. Now, it is possible that CAD/CHF goes up and tests the 0.7741 resistance level. If any of the candlesticks closes above the 0.7741 resistance level, then we will have a long trade setup based on the Stochastic Oscillator system.
However, there are a couple of things that you have to consider before going long in case a candlestick close above the 0.7741 resistance level. One of them is the length of the candlestick. If the breakout candlestick has a too long body, then you have to be careful because there will be a higher chance of retesting. Also, your stop loss will have to be wider. In such cases, it is recommended to wait for retesting, or take a much smaller position. The market can go up without retesting, and so you miss the chance of taking the advantage of the uptrend. These are the things that you have to consider.
CAD/CHF Weekly Chart:
On the daily chart, you can analyze the case in more details. Indeed, while the market retested the 0.7741 resistance level, it formed another resistance level at 0.7765 on the daily chart.
The 2016.12.30 daily candlestick formed a strong long trade setup which is where the 2016.12.25 weekly candlestick started forming a long lower shadow and closed above the middle band on the weekly chart.
We will have an eye on the daily chart too. In case it breaks above the 0.7765 resistance level, we can go long:
Please note that this is not a trading or investment advice. It is just a market analysis for the educational purposes only. You trade at your own risk.
Good luck 🙂