Chart Patterns Within Patterns: A Guide to Nested Setups

27 août

Daily Chart Analysis:

Pattern Overview:
The daily chart shows an Ascending Channel formation, which generally indicates a bullish trend but can also signal a potential reversal if the upper trendline acts as strong resistance.

Within the ascending channel, there are continuation patterns such as smaller bull flags, which suggest bullish momentum continuation.

Key Resistance and Liquidity Zone (LQZ):
The upper trendline of the ascending channel aligns closely with the recent highs around the $2,530 - $2,540 region, creating a significant resistance area.

The 1-Hour Liquidity Zone (LQZ) at $2,486.793 is marked below the current price, indicating potential areas where price might retest before any significant upward or downward move.

Potential Reversal Signal:
The upper boundary of the ascending channel has recently been tested multiple times, and each time, there has been a slight pullback, indicating selling pressure. This could be a precursor to a possible reversal if this level is not broken with conviction.

4-Hour Chart Analysis:

Nesting Patterns:
The 4-hour chart also reveals several nested patterns within the broader ascending channel, including smaller bull flags and a potential double-top pattern forming at the resistance zone.
The price action is consolidating below the resistance line at $2,530.750, creating a possible Double Top scenario, which could indicate a bearish reversal if confirmed by a breakdown below the neckline support.

Impulse and Correction Phases:
The recent impulsive moves upwards have been followed by corrective pullbacks, which have been forming higher lows, reinforcing the bullish bias in the medium term.
However, the proximity to the resistance and the potential double-top formation might signal caution for long positions.
1-Hour and 15-Minute Chart Analysis:

Short-Term Structure:
The 1-hour chart shows a more detailed view of the recent consolidation phase near the key resistance level. There are signs of weakening momentum as prices approach the upper trendline.

The 15-minute chart further shows a tightening range and potential bear flag or a descending channel, which could indicate a short-term bearish continuation if the lower trendline of this smaller pattern breaks.

Critical Levels:
The support level around $2,486.793 (1HR LQZ) is critical for intraday trading. A break below this could lead to a sharper correction towards the lower boundary of the ascending channel on the daily chart.

For bullish continuation, a clear break above the $2,530 - $2,540 resistance with strong volume would be needed to confirm further upside potential.

Trading Strategy and Recommendations:

Bullish Scenario:
Look for a strong breakout above the $2,530 - $2,540 resistance on the daily chart, accompanied by increased volume and a break above the smaller continuation patterns (flags) on the lower timeframes.

Enter on a reduced risk entry after a pullback to the breakout level, with stops placed below the recent consolidation range or the 1-Hour LQZ.

Bearish Scenario:
Watch for a confirmed Double Top breakdown on the 4-hour chart, with a clear break below the neckline support around $2,486.793.

Consider short positions on the break of the neckline or after a retest of the breakdown level, with stops placed above the recent highs or the upper boundary of the descending channel on the 15-minute chart.

Risk Management:
Given the proximity to a key resistance level and the potential for a reversal, it is crucial to manage risk carefully. Use tight stops and consider reducing position size until a clear directional move is confirmed.