Unlock Trading Success with These Proven Chart PatternsTechnical Analysis of the Trade:
The chart you provided highlights several patterns and levels, which I'll break down into different components for a clear analysis:
1. Market Structure:
Ascending Channel:
The price is moving within an upward-sloping channel, indicating that the market is in a bullish structure. An ascending channel like this represents a controlled trend higher with occasional corrections, providing potential buying opportunities on pullbacks to the lower boundary of the channel.
Trade Implication: As long as price remains within this channel, the overall bias is bullish. A break below the channel, however, would signal a shift in momentum, suggesting a potential sell-off.
2. Bull Flags:
Bull Flag 1 (Lower on the chart):
This flag formed after a strong upward move, followed by a tight consolidation, which is a classic bullish continuation pattern. The breakout from this flag has already occurred, leading to a further upward push.
Bull Flag 2 (Upper on the chart):
Similar to the previous one, this bull flag formed after another sharp move up, indicating a potential continuation. The price is currently in the process of consolidating in this flag, which makes this an area of interest for a potential entry on a breakout.
Trade Implication : Both flags suggest that the market is in a bullish phase. You could consider entering on a breakout above the upper bull flag, aiming for continuation to the upside.
3. Support/Resistance Zones:
1-Hour Liquidity Zones (LQZ):
The chart shows two 1-hour liquidity zones:
Upper LQZ (Around 2660): Price is consolidating just below this area. This zone could act as short-term resistance but would be a strong area for a breakout and continuation move higher.
Lower LQZ (Around 2640): Should the price reject from the upper bull flag, this area is the next potential support zone where price could find liquidity and buyers might step back in.
4-Hour Liquidity Zone (Around 2622): This lower level is a major support area. If price retraces significantly, this could be a high-probability area for a reversal or continuation of the overall bullish trend.
Trade Implication: If the price breaks above the 1-hour LQZ (Upper), it could trigger a bullish continuation. If rejected, you might look for a retracement back to the lower LQZ or even the 4-hour LQZ for a potential buying opportunity.
4. Pattern Confirmation & Confluences:
Multi-Touch Confirmation:
The price has interacted with significant levels multiple times (ascending channel, bull flags, and liquidity zones), strengthening the idea that these levels are respected by the market. This gives added confidence in the patterns you are trading off of, such as bull flags and support levels.
Trinity Rule:
Before entering a trade, ensure you have at least three confluences. In this case, potential confluences include:
Price staying within the ascending channel.
Bull flag formation at the current level.
Proximity to key liquidity zones.
With these three factors, you can confidently look for a continuation to the upside.
5. Price Action Signals:
Correction vs. Impulse:
If the market continues to move upwards impulsively, it supports the bullish continuation thesis. However, if it begins to correct, expect a pullback towards the lower boundaries of the liquidity zones or the lower boundary of the ascending channel.
Trade Implication: If you see a sharp impulse (breakout of the upper bull flag), it could be a signal to enter long positions, while a slow corrective move might indicate waiting for a better entry lower.
6. Risk Management:
Stop Placement:
Place your stop loss below the lower boundary of the second bull flag or below the most recent swing low. For a safer trade, consider setting the stop just below the lower 1-hour LQZ (2640), where price may likely find support.
Trade Implication: This gives the trade room to breathe while protecting against a deeper pullback.
Take Profit:
Based on the bullish pattern, your first take profit should be just above the upper 1-hour LQZ around 2660, with the next take profit near the next liquidity zone or potential resistance levels further up.
7. Probable Scenarios:
Bullish Scenario: If price breaks above the upper 1-hour LQZ and the current bull flag, it could rally towards the next significant resistance level (around 2670-2680).
Bearish Scenario : If price rejects from the upper bull flag and falls below the lower 1-hour LQZ, it could retrace to the 4-hour LQZ around 2620. This area would then offer a high-probability long entry.
Summary of the Trade:
Bias: Bullish (based on the ascending channel, bull flags, and liquidity zones).
Entry Strategy:
Enter on a breakout above the upper bull flag, with the price moving above 2660.
Alternatively, if the price retraces, enter near the 2640 (lower 1-hour LQZ) or 2622 (4-hour LQZ).
Stop Loss: Below the lower 1-hour LQZ (2640) or the recent swing low within the bull flag consolidation.
Take Profit: Around 2670-2680 (based on the next potential resistance and liquidity zones).
