This trade breakdown is by Connor Ballinger, a member of the Duomo Team supporting our Premium Members.
This was an opportunity for a EUR/AUD short trade at 9pm UK time on 3 April 2020.
Weekly: Long-Term Structure
In terms of the structure there is not much consistency in any given direction. However, most recently, we have had consecutive a higher high and higher low, so we can make the soft assumption that we are in a slight bullish trend.
In terms of the wave structure, the current price level seems to be mid-way and it would be reasonable to assume, based on this alone, that the bearish move has potential to continue.
Weekly: Medium-Term Structure
The market shows us a strong bullish structure and a relatively consistent wave pattern. Again, It seems we have reached the peak of this wave and we are down the bearish leg back down.
Weekly: Short-Term Structure
Until the most recent bullish move, we have seen a consistent bullish structure. Identified by the consistent higher highs/low (excluding the one lower high).
Then the flood of new COVID-19 developments caused a very high momentum spike in the market. At this point, there are a number of possibilities, but the most probable can be assumed to be a relatively sharp pull back before continuing on its upward trajectory.
Now, the same chart is to be analysed in terms of significant levels in order to try get some indication of the expected size of this pullback.
Weekly: Significant Level Analysis
As shown in the below screenshot there are two main significant levels that are of interest in this instance. However, there is still a significant move required to reach either of them.
Should the daily time frame analysis provide a strong indication of direction and a good area to go short around the current price I would be happy to be bearish. This is the outcome that provides the most immediate action and is in line with where I believe we are in the market, although it will be countering a strong trend.
1-Hour Analysis (9 pm - 3 April 2020)
We had a low momentum move towards the reversal zone that has been very dependable in the past; this is our single confirmation. However, a double confirmation is required for this entry and since there is no double confirmation on this time frame so we move down to the 15-minute time frame to see if there is a possible entry.
15-Minute Analysis (9pm - 3 April 2020)
At 9pm the price closed as a perfect Type 1 setup candle on the 15-minute trend line, giving us the double confirmation with the previous Type 1 on the hourly reversal zone. This gives us a short entry in line with the overall 'narrative' of the trade.
Stop loss: Just above the hourly reversal zone.
TMP: In line with the previous swing low from the short-term wave structure, around the midpoint of the range.
Percentage at risk: 0.9%
Type 1 on the bottom of the range and the 127.2 extension level.
The first major decision point occurred when the price closed as a Type 1 setup candle on the bottom of the range and the 127.2 extension level.
My belief was that there was a much larger potential move. The short-term wave structure had now created a lower high and lower low and the hourly period was closing with high momentum. These were positive signs for the continuation of this trade. However, I wanted to reduce my risk at this point and close 50% at an R: R of 4:1.
At the bottom of the move, we can see the price starts to struggle and shows signs of a loss of momentum, following the consecutive higher low and high the remainder of the trade was closed at an R:R of 8.3:1.