From the Desk of Ian Culley @IanCulley
One of the most valuable tactics I’ve learned in my career is the ability to capture a strong trend as it’s trending.
I’m not talking about FOMO buying or blindly chasing breakouts.
In my experience, buying strong trends requires patience and discipline.
Today, exercising these two key traits is especially necessary if you’re trading the explosive US dollar.
Navigating the latter stages of the dollar rally presents challenges, particularly in dealing with heightened volatility. However, it doesn’t mean we can’t join in on this trend responsibly as it barrels down the tracks… or, in this case, up them.
Check out the weekly chart of the US dollar/Canadian dollar pair:
Price resolved higher from a 16-month rising wedge last month, climbing almost 1,000 pips in a few weeks. Unfortunately, the breakout was messy and not the easiest to manage.
Don’t worry if you missed it. The daily chart forms a potential bull flag:
The flag on the USD/CAD chart isn’t the cleanest look. I usually prefer a tighter, more well-defined pattern. But the market doesn’t care about my preferences.
In this case, it’s all about the price action leading into the pattern and the duration of the pattern itself. The preceding move should be strong and forceful, and the consolidation should be no more than two to three weeks long.
The USD/CAD chart checks both boxes.
A decisive close above 1.3877 completes the bullish continuation pattern. We can be long if and only if it’s above that level, targeting 1.4450.
If this is a true half-mast flag, the breakout and subsequent move should mirror the price action leading into the pattern. I don’t imagine holding this position for more than a few weeks if and when my entry order is filled.
The US dollar is speeding down the tracks. If you’re not already long and want to capture a piece of this uptrend, your best bet is to catch a short continuation pattern, such as a flag or a pennant. But you have to be nimble.
Your orders need to be in ahead of time. And any lack of immediate follow-through is suspect.
Trading grains during the past six years has taught me a lot about myself and volatile price action. These markets are challenging to say the least. And I’ve proven to be my own worst enemy on more than one occasion.
These trades aren’t for the faint of heart. Proceed with caution, protect your capital, and hold on tight!
Thanks for reading.
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Allstarcharts Team