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A chart pattern is a distinct price formation that creates a trading signal, or a sign of anticipated price movements. Chartists use these patterns to identify current trends and reversals and to set buy and sell signals.
Among the different chart patterns, the 123 pattern is a considered to be an effective and successful pattern.
When the 123 pattern occurs at the end of a trend, it is a strong indication of a change in trend. Since price always moves in waves, this pattern can also be found within a trend and within a trading range.
But one must understand the advantages and drawbacks for any trading technique.
Implementing the technique in the live markets is the crucial part and one must have a trading plan defining the precise entry, stop and exit levels.
Learn how to identify this pattern and set the precise trading parameters of entry, exit and stop levels.
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The pair is in a short term widening range, with bias currently to the upside. A push above 1.4250 would confirm, with a target of 1.4310. 1.4340 and 1.4380 are resistance levels beyond.
A drop below 1.4200 will like test 1.4180. A drop below 1.4170 will need to move through further support in the 1.4160-1.4140 region and if it succeeds will target 1.4120 then 1.4080 (if needed).
The pair dropped below a rising short-term trend line yesterday but has come off those lows and is now trading above it. 95.70 and 95.40 will act as support, as well as the recent lows near 95.00.
A break above 96.35 indicates a move higher with a target of 96.60. 96.90-97.00 is the resistance level beyond.
Forex trading analysis by Forexpros.com - Written by Corey Mitchell
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