AUDUSD is making a good case for three winning days on the spin, so does that mean we have a bottom in place?

AUDUSD is looking a bit more healthy than it has of late. The low put in place around 0.7330 on the 9th was supported by a slightly higher low on the 11th.

AUDUSD H4 chart

This type of pattern is very important when judging tops or bottoms. If you want to rely on a level that's just been established, you want to see it stoutly defended when it's tested again. When you see that it's been tested but has come up short of the actual prior hi/lo, that's a very clear signal that the hi/lo is being well protected and you have a low risk trade against that level.

With the low here at 0.7330, and the test coming to 0.7337, a long with a 10-20 pip stop would have been great risk reward. Ok, this is after the fact stuff now it's shot higher but it's the lesson that's important here. This pattern is what you need to look for when trying to catch a reversal after a big move. Where a first high or low is placed can be guesswork (I don't know why the price stopped at 0.7330) but when it happens, it's from the secondary action that you can pluck a trade.

This pattern is a short-term move but you can find them on any time frame, and indeed, they've been important for gauging my long-term EURUSD longs.

EURUSD daily.

Points 1 & 2 were levels I watched on the way down and formed part of my entry strategy. What happened after though is exactly the same as the aussie chart above, just on a bigger scale. This time though we actually had an idea of where a secondary test of the 1.03 lows might stop (point 3). On the aussie chart we didn't so we would have had to rely on the price action, so maybe a buy would commence on that 3rd bar near 0.7337.

On the EURUSD chart above, we could have planned a trade at point 3 because we already had something tangible from that level, prior tech. The same applies to point 4 when we get a test down towards point 3 but in this instance, I didn't have the horizontal line beforehand (prior evidence of a tech level), so we had to rely on the PA to give us the clue that point 3 was being protected. In this case a break and hold back above 1.06 would have been the time to trust the point 4 support and go long.

Again, I know this can be looked upon as after the event trading but I want to stress that that this pattern is something you can look for and plot in advance, or react to if there's no coloured lines to reply on previously. The exercise for you guys and girls now is to look at the levels you trade, particularly after a sizeable move (and that can be judged in any context on any timeframe), and plot the areas where if the price comes back on you, where you would expect to see your level protected. If you already have something drawn on your chart, great. If not then the PA will be your greatest guide. This pattern can not only give you a signal for an entry, it can also give you a warning that your trade might be in trouble, and at least offer you some time to think about whether you want to keep the trade or exit and save money.

Anyway, back to the aussie as this was supposed to be a simple tech post but I've gone off on one of my ramblings :-D

0.7400 is the obvious level here and above, we'll see some stickiness around 0.7425/45, and then the 38.2 fib of the March drop.

AUDUSD daily chart

What is looking extremely horny right now is all the tech around the 50.0 fib. The fib, the dma's, prior S&R, it's giving me goosebumps as I absolutely love a confluence of decent looking tech.

In prior posts/comments I was hoping to grab a long down closer to the 0.7300 level and that trend line so I might have missed the boat on this, we'll see. I'm going to be watching that 0.7540/50 level like a hawk though.

Finally, back to the lesson above, if you've shorted into 0.7400, you'll want to see 0.7370/80 broken, and then that will be the protection point to watch if it moves back towards 0.7400 ;-)