Failed Breakdown Reversal vs. Bearish Continuation
Market Context:
After a sustained Down Trend, GBPAUD formed a Bearish Rectangle. The initial breakdown led to an oversold RSI (below 30), suggesting a climax rather than a sustainable move. Price has since formed a Double Bottom with a clear Bullish Divergence, indicating a potential failed breakdown and a reversal.
Technical Analysis:
Scenario 1 (Reversal): The Double Bottom and Bullish Divergence suggest that the breakdown was a “liquidity grab.” A break above the local neckline confirms a short-term trend shift.
Scenario 2 (Continuation): If the price fails to sustain the bounce and forms a Bearish Flag, I will look for a secondary breakdown.
Key Filter: For any sell entry, the RSI must not show bullish divergence during the breakout to ensure strong bearish momentum.
Trade Plan (Scenario 1):
Entry: Long entry 20 pips above the Double Bottom neckline.
Stop Loss (SL): Placed below the Double Bottom support level.
Target (TP): Aiming for the top of the previous Rectangle Pattern.
Risk Management: Strictly 0.75% risk per trade with an focus on the 1:1 RR minimum.
Disclaimer: This is for educational purposes. Markets are volatile; wait for clear price action confirmation before execution.