The March Canadian Dollar is showing signs of life this morning after Thursday’s and Friday’s dismal closes. Although a daily closing price reversal top was formed on January 19, the pattern didn’t look like the typical reversal top in that it was not formed following a prolonged move in terms of price and time. In hindsight, it looks as if it was formed simply as a reaction to the .9923 main top from December 8.
Monday’s early upside action suggests that bullish traders are ready to give it another go at an upside breakout since there appears to be overnight demand for risky assets such as commodities and stocks. Bullish traders may be licking their chops at the current formation because of the huge amount of room to the upside over .9923. If there is upside momentum on the breakout with above average volume, we could be looking at the possibility of an acceleration to the upside once the resistance is cleared.
If the market breakouts, but there is a pull-back then traders should watch for the old top to become a new bottom. If it fails to provide support then we can conclude the breakout was triggered by buy stops rather than fresh buyers. There is a strong possibility of this occurring since volatility has been dropping and volume has been relatively light.
Besides the resistance levels, traders should also be watching the support levels. After zigzagging several times over the uptrending Gann angle, it looks as if traders may be establishing support at .9875. The first sign of weakness will be a break under .9827; however the main trend will not turn down until the main bottom at .9711 is violated.
For more information, please visit http://PatternPriceTime.com.
