Trade Setups Based on the Candlestick Formations

With the start of a new month, Forex traders have the luxury of analyzing new monthly candlesticks and patterns.

In January of 2015, there was a wide range of valuable information. This post reviews those interesting opportunities and conclusions on the majors which we can learn from for future trades to find setups based on candlesticks formations of the major forex pairs.

Candlestick Formations

EURUSD

The EURUSD monthly candle of January 2015 was not only heavily bearish, but it was also a massive candle: more than 1,000 pip from high to low. This has been by far the largest bearish candle since the downtrend started in May 2014.

The wick at the bottom candle represents +/- 185 pips which are 18.5% of the entire candle. For the bears, it was certainly a decently strong close but not as sturdy as July ’14, August ’14, and December ’14 candlesticks.

2- 2- 2015 eurusd week

When analyzing the weekly chart, the EURUSD  showed bullish candlestick patterns for the first time a 7 week period. It is called a Harami candlestick and the pattern indicates a potential bullish reversal. This could set the tone for a bullish EURUSD this upcoming week.

2- 2- 2015 eurusd day

When I place a Fibonacci tool on the Harami weekly candle then the -27.2 and -61.8 Fibonacci levels (green Fib) are the key targets for the following reasons:

  • The previous consolidation zone (purple circle) could act as a resistance zone;
  • A zigzag correction would be completed (green arrows);
  • The bigger trend remains down (orange arrow);
  • The January candle is bearish and when the price reaches the Fibonacci targets (orange Fib), it will have retraced back to the 38.2 and 50% Fib levels of the monthly candle.

The path of the highest probability for the EURUSD, therefore, seems to be a bullish zigzag followed by downtrend continuation. This analysis is highly dependent on the NFP figures. The other majors are showing a different situation.

OTHER MAJOR FOREX PAIRS

The GBPUSD bearishness seems substantially less interesting to me due to various reasons:

  1. It has a GBP interest rate announcement on Thursday;
  2. Monthly support is close by;
  3. January’s candle was bearish but less impulsive than the EURUSD;
  4. The weekly candle closed bullish as well;
  5. The GBP has been showing strength against other currencies.

2- 2- 2015 gbpusd week

The USDJPY bullishness was certainly not visible on the USDJPY during January. Its candle closed bearish and indicates a decent to high chance of further consolidation. I am expecting the triangle to continue before any bullish (or bearish break) occurs.

2- 2- 2015 USDJPY 

Contrary to the EURUSD and GBPUSD, the AUDUSD not only had very big bearish candlestick patterns in January candle but also has a bearish weekly candle the previous week. There was no crucial bounce for the AUDUSD and hence I am expecting a more bearish trend. Technically speaking I am looking for more downside continuation upon the retracement of the monthly candle (orange Fib). The best turning spot is the 50% due to the resistance on the left.

2- 2- 2015 audusd 

What do you think of this tutorial on trade setups based on the candlestick formations of major forex pairs?

Wish you Happy Hunting!

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