NZDUSD 1-hour break out strategy on NFP news release
Here is another example of a highly reliable strategy to further train my reticular activating system (RAS). Though, the specific example here is on NZDUSD 1-hour it can apply to any currency pair on any time line. I like it on the 15-minute and 1-hour charts. The same set up on the 15-minute timeline is shown in the second chart.
Training my RAS to look for these will improve my odds of recognizing and acting on it live and improving my chart time analysis.
- This set up took a several days to develop and the key was knowing when major news is being announced. In this case, the US Non Farm Payroll (NFP).
- The first step is identifying extreme highs and lows and watching how price behaves at them.
- There are two highs identified by the red horizontal lines at 0.78577 and 0.78293
- There are two lows marked by the red horizontal lines at 0.77093 and 0.76821
- The next step is to identify the most recent HH and see that a new one is made above 0.78577
- The Thursday before NFP released price moved up sharply, right to the 0.78577 level. The 9am and 10am EST 1-hour bars were impulsively up but did not break the resistance red line.
- Over the next 14-17 hours price slowly pulled back to an earlier resistance level that was taken out by the 9 and 10am EST bar.
- A price shelf is formed on the small horizontal support blue line labelled 3.
- This is where the reliability of this set up increases. From the blue line price moves up trades and closes above the 0.78293 level. Now, the NFP news release could have easily carried price further up breaking the 0.78577 level. In that event I would have written and said price moved up sharply pulled back close to the .382 level and then continued up another leg.
- But, when price does not do that and instead breaks down below blue line 3, after the news release, it says that “No'” price will go down and likely to the next support level. This is what it did.
- In addition to breaking blue line 3 price also broke trend lines 1 and 2. Again, if price was going to move further up after the news release there should not be any reason for it to be below these lines, including the 21 ema. As I can see since Wednesday price has been moving up with the 21 ema and the trend lines as moving support.
- Often with misdirection like this the bar before the breakout is the opposite colour. This was again true in this case, the big impulse bar down is preceded by an up bar. I call this “misdirection before and impulse bar.” It can only be confirmed as such after the IB is closed.
- Note: as priced drops on IB and then further on the next two 1-hour bars there is no price action indication to take a counter trade. There is an excellent example of when to take a long trade here after the break of the pennant up and above the 21, but that is for another article.
- The entry could have been on the break of any of lines 1, 2 and or 3. Stop goes above the redline of 0.78577 and limits first target at 0.7735. with a double bottom adjusted target given the sharp move down with no sign of a pull back. It was an ideal impulse drop to a significant support.