Working With The Breakout
From the image above, we can establish a valid bearish flag formation. Price has broken out from the flag's channel and is making its way down.
Most traders would either sell at market or choose not to enter as they feel that since price has already broken out from the flag, they have loss the opportunity to enter the market.
However, not many traders realise that whenever price breaks out from a channel or a level of resistance, price is very likely to retest it again before making its way down.
Entering The Market
To set a level in which I would like to enter the market. I used the Fibonacci Retracement tool and took the swing of the lowest point to the highest point of the flag channel. I then realise that price has stalled at the 61.8% retracement of this swing (as seen in the image above).
The 61.8% Fibonacci level as we all know is a very strong point of resistance where price usually respects. As such I set my sell limit order at the 38.2% level of the swing as price is very likely to retrace upwards where the 38.2% Fibonacci level would serve as a price ceiling.
My predicted movement of where price would go can be seen by the black arrows which I've plotted in my analysis.
As predicted, price did retrace upwards where I got filled, respected the 38.2% Fibonacci level and continues making its way down further where I took modest profits of 54.3 pips.
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