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So, if you’re going to sell something, you want to be at a higher peak high. Well, that’s where we are now. We’re at the highest high of the pattern that we see setting up here. So, what we’re looking for now is signs and evidence of reversal. Evidence that shows us that the price action is turning around and going back down. And the risk in that scenario is that that doesn’t happen and it pushes through the pattern, invalidates the top of that pattern, the 1.2600-level, and continues to go back higher again.
So, while we’re up here, what we’re looking for is, again, evidence of reversal from the top of our longer-term. You might even call it a triangle pattern. And if it breaks it, that’s the risk that we have. Even today. If we zoom in one more time, even today we’ve seen the market come up to the pink zone, 1.2570, just like it did back here, where the circle is, and fall off of it. The question is: is this going to be a longer-term fall? Are we going to see it all the way back down to the yellow zone, 100-period moving average, or lower even to the bottom of the longer-term black triangle pattern that we drew out, or are we going to see it break through 1.2600 and continue higher?
We don’t know that for sure, but what we can look for is evidence of that. Lower highs. Lower lows. Some changes in the current pattern. Even if over the past four days, if you want to consider this as a short-term uptrend right here just for the past four days. If you’re looking to go short, you need to see some break of that pattern. At this point, 1.2520 or so, the green-shaded area may be the break of that pattern to go lower again and a lower high to be made.
The green-shaded area, 1.2520 to 1.2540. It’s only about 20 pips there. So, if it can get underneath there, that might be our next clue or piece of evidence that we’re looking for it back to the orange zone or maybe even back down here to the yellow zone or lower to the bottom of the longer-term pattern. If it stays above the green zone, we might look for another challenge of the pink zone, but a break above the pink zone changes the direction back to the upside for the GBPUSD.
Take it down here to the four-hour timeframe. We know that we have this little short-term trend here highlighted by the red trend line. Again, a breakdown of that trend line, a breakdown of that rising pattern we’ve seen for the past three or four days, we would look for it to go back down again. So, 1.2520 is kind of going to be our break point for the day today. If it can get through 1.2520 and settle out underneath it as resistance, we’ll look for it back to the orange zone or lower. If it can’t get through this red trend line, 1.2520, another challenge of 1.2570 may be in order for the day for the GBPUSD
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