Top Trade Idea For March 27th, 2014 – USDCHF

The chart above is the usdchf daily time frame and from my point of view the pair is at an important crossroad. The reason for that is the fact that the falling wedge there looks like a terminal impulsive move and this means it will be completely retraced.

The overlapping between the second and fourth waves is there, the alternation is there, the extension is there, all in one simple pattern.

Now, the question is if it is completed or not, and what to do and how to trade it?

It should be noted that the prior move to the upside is a five waves structure, an impulsive move, and therefore the correction here should only be a b wave of a zigzag, meaning we are looking for a five waves structure to come after the wedge is broken.

Our plan for trading the pattern assumes three different steps:

1. Buy every dip below 0.8800 with stop loss 0.8600 area and targeting parity. Why parity? Well, like mentioned above, terminal impulsive moves are completely retraced and this one to the downside started at 0.9970, so this is where we’re heading.

2. Buy a break of the 2-4 trend line for 0.9242 take profit and a stop loss 0.8835 This is just an intermediary trade, designed to catch the end of the first wave to the upside (we need a five waves structure to the upside remember?)

3. Buy a break of 0.9542 for 0.9970 take profit (or parity) with a stop loss 0.9320 area for this trade. This is designed to be the third wave up in that impulsive move so after the trade is filled, there should be little or no pullbacks as third waves in an impulsive move are impulsive as well.