EUR/NZD About to Break the Range - How to trade it?
Good Morning traders! Today we will show you our vision in EUR / NZD, since we consider that in the short term it will present a good trading opportunity.
Now we are going to explain why we say this:
🔸First of all, if we focus on the long-term chart (Daily), we see that the price bounced off a support zone and broke the Descending Trendline. Since then there was no clear direction and the price kept consolidating in a range.
In these situations, is when patience comes into play. It happens that when there is no clear scenario to trade, we tend to look for or create risky situations that in the long term do not bring us benefits, just because we feel that we need to execute a trade. Instead of doing that, we must wait for the right situation, and now it is about to happen.
🔸What we propose is that given the scenario that we explained previously, this pair has bullish power in case there is a breakout of the current pattern.
🔸The next target is in the Resistance zone.
If we analyze where we would place the entry, stop loss, and take profit, we realize that we have a negative risk-benefit ratio, since the income is above the current structure, the target is resistance, and the stop loss is below of the structure.
🔸What we do to prevent that from happening is to decrease the timeframe, and look for an opportunity there. Let's go to 4H:
🔸Basically, what we expect here is a breakout of the range but we will NOT take a trade there. We are going to wait for a corrective movement (in this case we illustrate it with a flag pattern), and we will operate that pattern, which does give us a good risk-benefit ratio.
Obviously, not everything is perfect when setting this scenario. There is a possibility that the breakout is very strong and there is no type of correction, which would leave us out of the game. But it is a risk that we assume in order to put the probabilities in our favor.
Now we are going to explain why we say this:
🔸First of all, if we focus on the long-term chart (Daily), we see that the price bounced off a support zone and broke the Descending Trendline. Since then there was no clear direction and the price kept consolidating in a range.
In these situations, is when patience comes into play. It happens that when there is no clear scenario to trade, we tend to look for or create risky situations that in the long term do not bring us benefits, just because we feel that we need to execute a trade. Instead of doing that, we must wait for the right situation, and now it is about to happen.
🔸What we propose is that given the scenario that we explained previously, this pair has bullish power in case there is a breakout of the current pattern.
🔸The next target is in the Resistance zone.
If we analyze where we would place the entry, stop loss, and take profit, we realize that we have a negative risk-benefit ratio, since the income is above the current structure, the target is resistance, and the stop loss is below of the structure.
🔸What we do to prevent that from happening is to decrease the timeframe, and look for an opportunity there. Let's go to 4H:
🔸Basically, what we expect here is a breakout of the range but we will NOT take a trade there. We are going to wait for a corrective movement (in this case we illustrate it with a flag pattern), and we will operate that pattern, which does give us a good risk-benefit ratio.
Obviously, not everything is perfect when setting this scenario. There is a possibility that the breakout is very strong and there is no type of correction, which would leave us out of the game. But it is a risk that we assume in order to put the probabilities in our favor.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.