Potential Short Setup – Head & Shoulders Pattern in PlayThe EUR/NZD currency pair has recently exhibited a head and shoulders pattern, a technical formation that often signals a potential reversal from an uptrend to a downtrend. This pattern comprises three peaks: the central peak (the head) is the highest, flanked by two lower peaks (the shoulders). The neckline, drawn by connecting the troughs between these peaks, serves as a critical support level. A decisive break below this neckline typically confirms the pattern and suggests a bearish reversal.
INVESTOPEDIA
In the case of EUR/NZD, the price has approached the neckline, which lies within a significant resistance zone between 1.8065 and 1.8160. A successful breach of this area could lead to further downward movement.
TRADINGVIEW
For traders considering a short position based on this pattern, it's prudent to wait for a clear break below the neckline, accompanied by increased trading volume, to confirm the bearish reversal. Setting a stop-loss order just above the right shoulder can help manage potential risks. The profit target is often estimated by measuring the vertical distance from the head to the neckline and projecting this distance downward from the breakout point.
INVESTOPEDIA
As of November 22, 2024, it's advisable to monitor the EUR/NZD pair closely for a confirmed neckline break before initiating a short position. Incorporating other technical indicators and staying informed about fundamental factors affecting the euro and New Zealand dollar can provide additional insights to support your trading decision.
