Cluster of resistance targets giving traders a reason to breathe a bit....
Earlier I outlined a resistance area up to 111.576 as an area that could give traders a "cause for pause" (see post here). Indeed, the price has moved higher in the NY session and in doing so, has reached the "cause for pause" area. The high price stalled at 111.555 so far.
Can the price go higher? Sure....And if it does, don't mess with it.
However, a "cause for pause" area allows traders long from below to sell some out, take some profit with the option to get back in (or ride a balance) through the resistance level.
What do traders risk by selling some out against the level? A few pips. Remember, the trader can simply buy back what he/she sold.
What can traders gain? If it holds, and the price corrects lower, they are now in position to set themselves up for the next trade on a correction.
What about outright sellers against the "cause for pause" area?
Why not.
Sell against the area, put a stop on a break. If it holds (because other traders are doing the same), the traders has great trade location for a correction back lower.
As traders, if you can pinpoint "cause for pause" areas, you have the potential to pick some tops and bottoms and execute trades with little risk. In the process you have the opportunity try to take advantage of traders taking profit and other traders trying to enter on a extreme. That is a combination that can work in your favor.
