Inverse H&S: a bullish pattern on A/U.

April 20, 2014

A/U: An example of a bullish ‘inverse Head and Shoulder’ pattern:

I fist noticed and wrote about this ‘inverse H&S’ pattern on the A/U on the 17th Feb 2014. This trade concluded on 10th April 2014.

Daily chart inverse H&S? The theory with these patterns is that the suggested bullish continuation is equivalent to the height of the H&S, that is, the height of the ‘Head’ from the ‘neck line’. The height of this H&S is about 380 ~ 400 pips or so. This would suggest a target for any bullish follow through to be up near the 0.945 region.

The key then is to wait for price to make a close up through the neck line of the inverse H&S pattern. This resulted on Friday 7th March 2014 and this is what I then wrote:

Friday 7th March (11.45 am)

I am placing a trade order in based on the bullish ‘inverse H&S’ pattern that looks to be unfolding on the A/U daily chart. The Aussie has made a daily candle close up through the ‘neck line’ of this pattern and I’m looking for a test of this key level before any possible bullish continuation:

 
A/U daily

A/U 4 hr
 
Daily chart inverse H&S? The theory with these patterns is that the suggested bullish continuation is equivalent to the height of the H&S. The height of this H&S is about 380 ~ 400 pips or so. This would suggest a target for any bullish follow through at up near the 0.945 region. Now, this is where it gets interesting! The Aussie is trading above the Cloud on the 4hr and daily time frame but below the Cloud on the weekly time frame. The bottom edge of the weekly Cloud could prove to be some resistance for this pair and this comes in at around the 0.94 region. This isn’t too far from the inverse H&S target so it would seem like a good ‘take profit’ region:
 
A/U 4 hr Cloud
 
A/U daily Cloud
 
A/U weekly Cloud
 
Thus, I’m placing this technical based trade with the following levels:
 
Buy limit:  0.905,  Stop: just below 0.90,  Take Profit: 0.94
I’m risking about 50 pips or so for a target of a possible 400 pips.
 
I am aware that it is NFP and, thus, it is only a small trade and hence the fairly tight Stop. Trading is very risking on NFP.
 
 

A/U Inverse H&S pattern completed 10th April 2014! 

This bullish move completed and delivered the full quote of 380 pips by the 10th April:
 
AUD/USD: 
I have been tracking the A/U ‘inverse H&S’ since back in February and I first detailed my analysis here on Feb 17th. This bullish pattern has now delivered the full quota of suggested pips: 380 pips
 
Daily chart inverse H&S: This technical pattern has delivered the full quota of the ‘suggested’ 380 pips. The theory with these inverse H&S patterns is that the suggested bullish continuation is equivalent to the height of the H&S, that is, the height of the ‘Head’ from the ‘neck line’. The height of this H&S was about 380 ~ 400 pips or so. This suggested a target for any bullish follow through to be up near the 0.940 ~ 0.945 region:

I had also suggested that this target region tied in with the weekly Ichimoku chart as well. Price has been above the Cloud on the 4hr and daily time frames but below the Cloud on the weekly chart. The bottom edge of the weekly Cloud posed some resistance though and made this a suitable area to look for profit. The bottom of the weekly Cloud came in at around the 0.94 region though too which wasn’t too far from the inverse H&S target so this gave added confluence to the ‘take profit’ region: