
An interesting pattern has
formed on the Aussie (AUD/USD) daily chart. Known as a cup and handle
formation, it is associated with consolidation. This is a nice way of saying
that market participants are concerned about a number of things that have the effect,
in the end, of contradicting each other.
According to the accepted
wisdom of chart pattern aficionados, the shape of the cup is important. It must
be considerably bigger than the handle and, allowing for normal market
fluctuation, must be of a fairly regular curved shape. While smaller, the
handle must also be well formed. The pattern above fits these criteria.
The fact that it is most
noticeable on the daily chart is also significant. This is the most important
chart for institutional traders and indicators that appear here are watched
more that most. The 200 period Simple Moving Average (SMA – thicker blue line
on the chart above) is another example.
For us the importance of
patterns such as this is that they are indeed watched and noted by many
traders, and therefore tend to become something of a self fulfilling prophecy,
at least for a time.
Really appreciating article thanks for this feels good to have this.
ReplyDelete