The EURCAD has printed a Bearish Engulfing Bar (BEEB) on the daily price action chart that is rejecting the old support/new resistance area. As the daily chart shows below; price has been in an extended down trend and this old support level is where price paused before then continuing on it’s move lower. Price has since retraced back higher to test this old support level and at this stage the old support has acted as a price flip level and as a new resistance.
The second 8 hour chart below shows how when price reached the price flip resistance, price was rejected and sold off heavily as the bears came in at the new resistance. This will often happen when price makes the first test of the new support or resistance because as I discuss in the trading lesson Taking High probability Trades From the First Test Support/Resistance, when price makes it’s first test of support or resistance the supply or demand will normally be at it’s strongest just like the 8hr chart shows below as it formed the bearish engulfing bar.
If price can break this daily bearish engulfing bars low, the first support area below comes in around the recent swing low area. From there for any decent move lower to occur, price would have to break the swing low area and price would then be trading down to prices that have not been seen in almost 12 months. If price does not move lower, the trend is still heavily down, so until the market shows otherwise, continuing to look for short trades in this pair looks the best play until a reversal plays out.
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EURCAD Daily Chart
EURCAD 8hr Chart
That’s great set up, I have entered the Trade already based on H4.
Hello Ram,
just keep in mind if you are looking to enter the daily BEEB or any BEEB we need to see it break the low or high to confirm the setup which this could not do to. If you want to read more about it see here: https://www.forexschoolonline.com//are-your-entries-blowing-up-your-trading-account-high-probability-price-action-entries/
Johnathon