The EUR/USD broke above the double top of a 3 week trading range yesterday. The bar was a bigger bar so it might soon attract profit takers. However, after 6 consecutive bull bars, the bulls will buy the 1st pullback. They are hoping it is a measuring gap for a 200 pip measured move up.
A trading range is a Breakout Mode pattern so there is a 50% chance of the breakout reversing down. Furthermore, a trading range late in a bull trend is a candidate for a Final Bull Flag. Therefore, even if the rally reaches the target, traders will look for a reversal down.
The past 6 days were bull days. While this is extreme and therefore climactic, it is a sign of strong bulls. Many bulls will buy the 1st 1 – 2 day pullback. Traders will want to see at least a micro double top before concluding that this breakout is failing.
Overnight EUR/USD Forex trading
The 5 minute chart of the EUR/USD Forex market has been in a tight trading range overnight. It is within yesterday’s range and oscillating around yesterday’s close and today’s open. It is the follow-through day after yesterday’s breakout. As long as today does not have a bear body, traders will expect at least a small 2nd leg up.
However, if there is even a 1 pip bear body, traders will begin to wonder if the breakout will fail. If it is a bear bar with at least a 20 pip body and a close on its low, the odds will shift in favor of a failed breakout.
Today will probably remain small and sideways, but its close will be important. So far, day traders have been scalping for 10 pips. But because follow-though bars can affect the direction of the next few days, there is an increased chance of a big trend day up or down.