After the Fed baited the market on with more of their ‘we might raise interest rate’ B.S. – we seen volatility pick up on EURUSD and a breakout of the ranging market structure it was stuck it.
Breakouts like this are a breath of fresh air for swing traders – as they can be the beginnings of large broader moves.
There are two ways this could play out in our favor. The first scenario is price will move up and re-test the old consolidation support level, and confirm it is holding as new resistance by printing a large bearish price action reversal signal – such as a bearish rejection candle. This would be the golden scenario, as it would provide a very good entry price into the emerging down move.
Secondly – we actually have an inside day that is very close to the turning point on the chart here. We could see the lows breached and fuel a bearish breaking, kicking off a move that way.
I always advise to take breakouts only when they occur in the London session, when the money is behind the move. This strategy helps avoid getting caught in breakout traps.
The Inside Day Breakout
As discussed above, we were looking for either a reversal signal, or an Inside Day Breakout.
The later occurred as price breached the lows of the bearish inside daily candle. This triggered a trend continuation breakout, the market had already broken through major support as was looking weak to begin with – the inside day break was the catalyst for a much deeper extension down into lower prices.
We’re now getting very close to a major weekly support level, so it is going to be very interesting to see how the market reacts with this strong reversal point. It would be a good target area to consider for anyone holding shorts.
For more information about trading price action via inside day breakouts, or swing trading in general, checkout our price action war room. Or, if you would like to receive alerts when Inside candles form in the market – checkout our Price Action Battle Station indicator.