Here we have EUR/USD on the 4H chart.
Recently, price has been in a strong down move. Price has recently lost a lof of the momentum that caused the bear run. On the 4H chart, it is clear that price is correcting after some downside.
Despite price having a sheer downtrend, it is time for it to correct. I believe now that price will drop and retest the sideways resistance channel as a new support and/or retest the horizontal before the new up move.
This trade will play out in one of 2 ways.
-Price continues to rally to the upside to the upside target of 1.1890. Bare in mind if this plays out that there will likely be some corrections on the way to the upside target on this, and smaller time frames alike.
-Price may retest the channel previous resistance turned support at 1.1740 before the upside. It could also equally as likely test the horizontal between 1.1730 and 1.1700.
If price tests both the horizontal and the sideways channel support this will be even more reliable.
We would strongly prefer the sideways resistance turned support channel AND the horizontal support level be tested simultaneously. This would significantly improve the odds of a better quality bounce.
As above, you will see that I outlined 2 places I wanted to see a correction. There was 1 particular scenario I was excited and hopeful to see.
To my joy, price corrected perfectly to the exact place I wanted to see it correct, at the place where price can test the horizontal support, and sideways resistance turned support.
With price testing both horizontal and side-ward support at the same time, it is a good sign of the state of the trend. If price failed at horizontal and side-ward support, it was 100% we should not be in.
With price bouncing on the 2 zones, we now have a great picture of the trend. It tested, and has shown bullish intention at the lows, it looks like it just needs to pick up some steam after an exhaustive downtrend.
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I am expecting price to retest structure before up move. I am expecting a retest to occur at either: 1.1750 (Sideways channel resistance turned support confirmation structure). Or, test the support zone between 1.1730-1.1690.
The retest would be of a better quality if it retests the sideways resistance turned support and the horizontal support zone simultaneously. This would provide a more reliable support ceiling for price to bounce.
Thank you :)