Price shakeouts of weak hands

Forex Chart Patterns

eur/ usd analysis
4-hour Euro Dollar

eur/ usd analysis
1 hour Euro Dollar

Head and Shoulder pattern
5 min Euro Dollar Chart Analysis

Consolidation Patterns

Weak hands getting shaked out in Trading

The Euro moved up to the1.2329 resistance level (purple line-October 2008 low and 20 SMA on the 4-hour chart) and from there market resumed its down trend and the Euro created a new daily low.

On the 5 min chart (below) we see that consolidations very often consists of three swings (red circles). One of them occurred in the Asian session between 2 - 3 a.m. GMT and after termination market moved to the 100 % fib extension. Another one occurred at about 10 a.m. and this consolidation is also the left shoulder of the Head and Shoulder pattern on today's market top, which took place at the 4-hour 20 SMA and the October 2008 low (purple line). The right shoulder is also a three swing consolidation and after termination the Euro penetrated the brown neckline. However, market consolidated below the neckline and slightly penetrated the neckline to the upside again. A reversal (failing of the H&S) or at least a shakeout got more likely due to the length of the consolidation below the neckline (Good trading opportunities at important levels/ pattern termination normally do not give much time for positioning as it is recognized by many traders and thus triggered fast).

The lengthy consolidation followed by the upside break of this consolidation through the neckline led to a kind of shakeout of the weak hands. The Euro found resistance at the 20 SMA on the 5 min chart and the price zone of the prior consolidation (right shoulder) so that the Euro resumed the down trend and triggered the H&S pattern. The 1 a.m. hourly candle triggered the stops below today's (green line) and yesterday's low (blue line) but the candle closed and formed a bull flag (on 5 min chart) at the recent hourly low at 1.2281 (blue line). The bull flag (blue circle) got triggered and market moved to the daily pivot and the 100 % fib extension on the 5 min chart. From there, the Euro resumed its down trend again. The 2 p.m. hourly candle closed at the daily S1 (red circle on hourly, weakening this level) and the following hourly candle starting at 3 p.m. moved below it and closed at Monday's gap opening at 1.2253 (brown line). Another timing setup occurred with the start of the new 4-hour candle at 4 p.m.. The Euro terminated it's three swing consolidation pattern on the 5 min chart at 3:45 p.m. (red circle) and market moved lower again after the previous 4-hour candle closed and weaken the gap opening support (brown line). However, the Euro did not confirm the breach of the prior consolidation low at 1.2245 (green circle) and the Euro reversed and the 4 p.m. hourly candle closed at the gap opening (brown line). Market is currently consolidating around this level.

The pin bar at 8:25 a.m. after the penetration of the 1.2288 level (pink line-low of June 1st) led to a non-confirmation of the break and the Euro moved up again after the bull flag just above the pink line. A hint for the continuation was the close of the 9:20 candle at/above the daily pivot with the confirmation of the following 5 min candle.

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