Revisiting the USDCAD today looking at a situation here on the daily chart which looks like we could be seeing a mean reversion.
A mean reversion is where the market overextends of the 10 & 20 mean value zone and ‘slingshots’ back towards it in a violent fashion.
We can see the intense sell off has caused the market to ‘gap’ from the mean, which is a good indicator that the market is in a state that is prone to snap back the other way.
To add to this, we’ve got a very large bullish rejection signal which also signals rejection of any further lower prices, and a build up of bullish pressure to kick off the correction. There is also an inside day which formed afterwards as the market stalled last session. A break of the high could be the ‘trigger’ this market needs to fire off the move.
This is a counter momentum trade idea, for those who want to align with the overall bearish momentum here – wait for some nice sell signals at the old support level.