Greetings traders!
We are looking for a possibility of a bull run with AUDUSD. Let me explain and go in-depth with this analysis with you; showing you exactly what I see and where I will be placing my orders. Let’s start with looking at the overall trend of this pair starting from Monthly > Weekly > Daily > 4-hour > 1-hour > 15-min and we will go into detail as we go deeper in the chart.
Seeing the overall movement of this pair on the Monthly timeframe, I’ve placed my key level on 0.70330. I don’t see this key level being broken. Though it made a huge wick down twice touching my weekly support at 0.68433, I see this as a price exhaustion to complete a double bottom pattern. This gives me a good confirmation of a reversal and bull run. My RSI & Stochastic RSI also shows a good indication of an oversold market.
As you can see on this Weekly timeframe, with the same key level on 0.70330, there are a lot of wicks and reversals. Take the time to compare the Monthly and Weekly timeframe and see the candlestick difference below that key level. This tells me that anything below 0.70330 key level on Monthly is just a fluctuation and is a good price for me to place buy orders.
One thing to keep in mind is my Stochastic is showing an overbought market and looking for a sell on Weekly Timeframe, but my RSI shows that this market is still a market ready to push up. With these 2 indicators contradicting each other, I now have to look for more confirmations such as market patterns, supply and demand zones, trendlines and going into smaller timeframes.
Placing this trendline and seeing it being broken and retested, this gives me another confirmation for a bull run. The more confirmations I have, the more confident I am with placing my trades. I’m looking for a bull run towards 0.76550. This setup is definitely a long term trade, targeting at least 600 pips. Let’s not rush into placing trades right away. You may look at this multiple ways for more confirmation.
Aside from the trend being broken, this could possibly be a Triple Bottom if you don’t count the wicks since it failed to break that key level. However, on smaller timeframes, I may see more of a Head & Shoulders instead of a Triple Bottom. Overall, these patterns give me more confidence that this market may reverse from this key level.
This market hasn’t closed the candle highlighted so I don’t know if this market is going to keep dropping or close above the price level. Let’s remove the key level and place a Demand zone; focus on the particular area highlighted and go to a Daily timeframe for confirmations. Let’s take a closer look…
The way I see it, this is good zone to place buy orders for multiple reasons just from this timeframe:
1. This is a demand zone.
2. This looks like an inverse Head & Shoulders.
3. The candlestick pattern highlighted in the picture above is a Bullish Engulfing — meaning this is a reversal pattern to the upside.
4. My Stochastic shows an oversold market — meaning a buy opportunity.
5. My RSI shows a buy opportunity as well.
In other words, this is a beautiful time for me to place orders since my Monthly, Weekly and Daily indications are all showing a buy around this price level.
I’m still in the Daily timeframe so the fluctuations in the smaller timeframe may be huge. I want to place my trades properly with very minimal drawdown. Let’s zoom in on the Bullish Engulfing pattern and go down to 4-hour timeframe and analyze it to start looking for entries.
This is the Bullish Engulfing pattern I highlighted in the last photo. Taking a closer look, this looks like a possibility of an inverse Head & Shoulders. I’ve place my supply & Demand zone. Essentially, my neckline and shoulders to create a projection or how I’m expecting this market to move. My Stochastic supports this scalp sell towards 0.70255
With this projection I created, I have an idea of where I’m placing my orders, Take Profits and Stop losses. I can sell towards my buy limit if I want to catch all the profit. However, it would be very risky if this market decides to break neckline already, follow a different analysis and continue its movement going up. Personally, I don’t take every setups I see. I let the market do its job and wait for my pending buy orders to open. A stop loss is in place to avoid large losses.
Before I share my entries and exits for AUDUSD, let’s double check on this 1-hour and 15-min and look for more confirmation.
Looking at the same pattern on 1-Hour timeframe, we can clearly see that this is a broken trend and we’re now looking for a retest point. So this confirms our sell towards 0.70255. Here are my pending buy and sell orders. Again, look at my Stochastic and RSI; they both show a strong sell.
Sell Execution:
Entry: 0.70500
Take Profit: 0.70255 (24 pips)
Stop Loss: 0.70540 (5 pips)
Buy Limit:
Entry: 0.70255
Take Profit 1: 0.70500 (24 pips)
Take Profit 2: 0.70920 (66 pips)
Take Profit 3: 0.71930 (167 pips)
Long Term Take Profit: 0.76550 (630 pips)
Stop Loss: 0.70155 (-10 pips)
Here’s another way to see why I’m seeing a sell from 0.70500 to 0.70255…
Wicks do not lie. They often show spike towards price we’re looking to break or reverse from. Long wicks often give it away and when I see reversals and retest around the same price level, that usually tells me the market is having an indecision or may be rejected at that price and go other way around. Just take a look at my supply and demand zones… The retests and reversals are mostly around the same price.
Overall, I see this small sell setup fluctuating for a short period of time and the long term bull run may last at least a month, but I am confident this setup will move soon. We have more than enough confirmation on multiple timeframes to consider this bull run plausible. With a 10-pip Stop Loss and a gain of 600+ pips and potentially pushing up even more after that, this is a 60:1 profit/risk ratio. I may place a lower Stop Loss just to avoid my stop loss from being wicked.
If you want one more confirmation, take a look at the next photo.
DXY shows dollar weakness on Daily timeframe, meaning AUDUSD will go up. If that channel breaks, then we have a long way to go down with DXY, which means a long way to go up with AUDUSD.
Stochastic and RSI both show an overbought market and support the sell action happening soon.
I hope this helped you gain confidence and understand reading the market better. I’d like to hear your questions, comments, or concern regarding this article in the telegram chat. Happy Trading!
Gian Gonzaga
Paramount Trader & Co-Founder