Very nice development for our $EUR/USD Head and Shoulders last night. This puppy is steadily increasing strength and pattern recognition from the large time frame traders. This is exactly what we want to see. The attached chart shows what we have been looking for, and have seen on smaller time frames, but we now have a clear illustration on the Daily Chart....
Yesterday's daily candle closed just below the neckline, and while we may whipsaw back and forth within this area for a while, the potential for the next leg down has been fully confirmed, and all we need to do now is enter, set the stop, and walk away. I am personally putting several positions on for the $EUR/USD, some with stops just above the neckline, and others with stops above the top of the right shoulder. These patterns have a very high percentage of reliability, but they also come with a very high level of volatility centered around the neckline area. This can be attributed to the dense confluence of emotion/psychology driven reactions to price, previous enty, previous exit, holding, waiting, anticipating, front-running, chasing, you name it, its all there. However, the key is the daily bar closing under the key level, no matter whether there is retrace or not before it officially breaks. So....Long story short, you are now free to enter on the Daily Chart signal, stops at the very least should go above the illustrated neckline. Like I said above, I will have some stops very near the top of neckline, and some actually above the right shoulder. Either way, set them, and forget them.....
Happy Trading....
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