Complex H1 head and shoulder's top, anyone?

5 de jul. de 2020

Monthly timeframe:

(Technical change on this timeframe is often limited though serves as guidance to potential longer-term moves)

Support at 1.1904/1.2235 and long-term trendline resistance (1.7191) remains clear structure on the monthly timeframe at the moment, with the latter prompting a notable upper shadow in June.

Concerning the primary trend, lower peaks and troughs have decorated the monthly chart since early 2008, essentially placing 1.1904/1.2235 in a vulnerable position.

Daily timeframe:

Partially altered from previous analysis -

Demand at 1.2192/1.2361 recently received price action, stirring a notable bid and consequently chalking up two back-to-back bullish candles (Tuesday/Wednesday), each closing just shy of best levels. Current demand, as underscored in recent analysis, is an area not only fastened to the top edge of monthly support, it is also considered the decision point that broke 1.2647 (April 14 high).

Thursday, however, answered back with a shooting star candlestick configuration, generally considered a bearish reversal signal, with Friday responding indifferently. The 200-day simple moving average at 1.2681, in the event buyers regain consciousness this week, is likely marked as the next available resistance on this timeframe.

H4 timeframe:

Partially altered from previous analysis -

Sellers made their presence felt Thursday, unwinding from session peaks at 1.2530, just ahead of supply at 1.2652/1.2544.

Friday’s session, albeit mellow due to Independence Day in the US, recognised a mild degree of support off 1.2453. Whether this is enough to address Thursday’s highs or supply at 1.2652/1.2544 is difficult to determine at this point.

Sub 1.2453, sellers appear free to stretch their legs until crossing paths with demand at 1.2360/1.2386.

H1 timeframe:

Chart pattern traders, Friday, were greeted with a head and shoulder’s top pattern (1.2490/1.2530/1.2486), formed around the underside of the 1.25 level. The neckline connected to the pattern (1.2460) aligns with 1.2450. As you can see, both the aforesaid levels faced downside attempts Friday, though price failed to secure a decisive close lower. Although some traders may consider the recent penetration of the neckline a signal to short, a H1 close under the neckline is what most technicians will be looking for.

What we have now, assuming we dip lower from current prices today, is perhaps a complex head and shoulder’s pattern forming – essentially two right shoulders.

A close beneath the neckline unmasks demand at 1.2415/1.2386 (prior supply), an area holding the 1.24 level within and aligning with a 100-period simple moving average.

Structures of Interest:

Long term:

Aside from the clear downtrend the pound remains in, the technical construction on the monthly chart has price action sandwiched tightly between the support area at 1.1904/1.2235 and trendline resistance.

Thursday’s shooting star on the daily timeframe is perhaps still of interest for many traders this week, despite Friday’s lack of enthusiasm.

Short term:

H4 has price action engaging support at 1.2453, while H1 displays scope to form a complex head and shoulder’s top.

Therefore, we have two diverging opinions in the short term. Longer term has the daily timeframe suggesting sellers have a slight advantage while monthly, although trending lower, is currently involved in a tight range, offering limited directional cues right now.