25 Oct 10 - Bearish Butterfly Pattern on AUD/USD - H1 Chart

This week started with the market making very little move while the JPY pairs seem to be choppy.


A little risky to trade this week as prices swing up and down with a lack of direction until today.


Earlier at the start of this week, AUD/USD set itself up for a sell when a bearish Butterfly pattern was completed.


Signals validating a short for this pair were:

• A 0.786 retracement at B point which clearly pointed to a potential Buttefly pattern.
• A confluence of 2 harmonic ratios at the completion of point D - 1.27 XA @ 0.99307, 1.618 AB=CD @ 0.99245 and 2.0 BC @ 0.99491.
• Price action which clearly showed that price was unable to hold above the PRZ.
• Bearish Engulfing Pattern which happened 2 bars before the T-Bar completion.

Trade Details:

• Date: 25 Oct 10
• Time: GMT 17:00
• Entry Price: 0.99104
• S/L: 0.99750 (64.6 pips)
• T/P: 0.98300 (80.4 pips) - 0.618 AD Swing

Trade Progress


The 1st Batch was closed on 26 Oct 10, GMT 07:57 at 0.98875, netting a profit of 22.9 pips when price moved near the 0.382 retracement level of AD swing.


The 2nd Batch hit the target objective on 26 Oct 10, GMT 17:58, netting a profit of 80.4 pips.




Note:


It should be noted in this case that trade management was purposely managed at a slower pace as usual as the following were noticed:

• Price was forming lower highs and lower lows, signifying that a downward move might be in play despite a lack of a very decisive move.
• Price was still respecting a falling trend line.

Reflection


Though the trade turned out to be a "home run" move and I was out only at the 0.618 AD swing, I still think that this was a nice trade. Then again, as a result of a sluggish move at the start of this week, I was not very comfortable to push my target objective lower anyway. Such incidents will occur frequently in trading and we should just look forward as there will be many trades to come and a miss on this move is okay.