Top Down Bullish Analysis on EUR/USD
Good morning traders, today we will do an explanatory post on how to carry out an in-depth top down analysis, that is, an analysis where we take into account multiple time-frames to generate a clear vision of the market. In this case we will apply it to the EUR/USD as it has the potential to generate an interesting upward movement in the medium term.
We select the following timeframes to analyze, Weekly, Daily and 4 Hours.
- We will start with the Weekly chart to look for the main long-term trend.
🔸What do we see in this chart?
- First, we must clarify that there is a downtrend that remained within the channel for more than 12 years. This year we saw a break to the upside, which is a strong bullish signal.
- If we take a detailed look at the base and then the bullish impulse, we clearly see that it is a succession of higher highs and lows, which tells us about a short-term uptrend.
🔸Now where are we?
- To see the current movement in more detail, we decrease the timeframe to the Daily.
- The Daily chart is the one we see in the idea, where we mark the uptrend with a bullish channel. We see that the lower trend line was broken down, but the trend is still in effect as the local low was not broken. The succession of higher lows is maintained.
- The corrective movement was quite pronounced, it has lasted more than 3 months. The last few weeks we saw a strong move to the upside, and now the price is near the top of the correction.
- What we are looking for is a breakout of the corrective structure, and a subsequent movement towards the Resistance zone, which is the one that is detailed on the Weekly chart.
- The point is that it does not make sense to look for a trade in the bigger structure, since the Risk-benefit Ratio that it offers us is very poor. We should place the stop loss behind the structure so that it is safe, and our take profit would give us less money than we would be risking.
- To solve this, we again decrease the timeframe, now to 4 Hours, where we will look for our trigger to enter the market.
- As we see in the image, we will wait for the breakout to happen. But after that, instead of buying directly, we will wait for a corrective structure that allows us to place our entry above the B wave of the structure, and the stop loss below the last swing. In this way, we will have a trade that gives us a greater benefit than our risk and is worth taking the position.
We select the following timeframes to analyze, Weekly, Daily and 4 Hours.
- We will start with the Weekly chart to look for the main long-term trend.
🔸What do we see in this chart?
- First, we must clarify that there is a downtrend that remained within the channel for more than 12 years. This year we saw a break to the upside, which is a strong bullish signal.
- If we take a detailed look at the base and then the bullish impulse, we clearly see that it is a succession of higher highs and lows, which tells us about a short-term uptrend.
🔸Now where are we?
- To see the current movement in more detail, we decrease the timeframe to the Daily.
- The Daily chart is the one we see in the idea, where we mark the uptrend with a bullish channel. We see that the lower trend line was broken down, but the trend is still in effect as the local low was not broken. The succession of higher lows is maintained.
- The corrective movement was quite pronounced, it has lasted more than 3 months. The last few weeks we saw a strong move to the upside, and now the price is near the top of the correction.
- What we are looking for is a breakout of the corrective structure, and a subsequent movement towards the Resistance zone, which is the one that is detailed on the Weekly chart.
- The point is that it does not make sense to look for a trade in the bigger structure, since the Risk-benefit Ratio that it offers us is very poor. We should place the stop loss behind the structure so that it is safe, and our take profit would give us less money than we would be risking.
- To solve this, we again decrease the timeframe, now to 4 Hours, where we will look for our trigger to enter the market.
- As we see in the image, we will wait for the breakout to happen. But after that, instead of buying directly, we will wait for a corrective structure that allows us to place our entry above the B wave of the structure, and the stop loss below the last swing. In this way, we will have a trade that gives us a greater benefit than our risk and is worth taking the position.
כתב ויתור
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