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Short-term Trading Idea: FX USDCAD – Bull Speculation: Trading on the Pinbar

Trading opportunities for currency pair: the dollar has rebounded from the 50% limit, the trend line and the lower limit of the channel. On the weekly a hammer or pinbar (reversed candle) has formed. If the dollar hastens after the correction, then consider the 1.2350-1.2400 region as something like a price zone.

The last review I did on the Canadian was on 6th April. Back then there was a double peak on the weekly. Weak NFP stats were a signal for traders that the US Fed wasn’t going to raise rates in the near future.

In that idea I considered a break in the 1.2390 – 1.2350 zone of support and a drop in the rate to 1.2012. A close higher than 1.2650 cancelled the scenario of a reduction in the rate. Before falling, the USD/CAD reached 1.2666. The scenario wasn’t cancelled out since the day closed lower than the 1.26 level. On 29th April the USD/CAD rate reached 1.1944. The target was reached.

Weak US economic data and a growth in the price of oil have allowed the dollar to correct itself by 50% of growth from 1.1190 to 1.2834. Now we’ll have a look at why I’ve chosen the USD/CAD this week.

I want to bring your attention to the weekly candle. On the daily I’ve put a section from the weekly graph. The week closed hammer. Its other name is a Pinocchio Bar, or pinbar. Traders use this name in Price Action strategies.

A pinbar is an excellent setup (pattern or candle pattern) for dollar purchases against the Canadian dollar. The bigger the nose, the more reliable the pinbar. The pinbar is a reversed setup, but it doesn’t always come off as highly accurate. The candles with long shades don’t guarantee it coming off 100%.

When using pinbars, the best setups appear when they are rebounding from significant price levels (fibo, pivot). This is why I’ve chosen the USD/CAD, since the dollar has bounced back from the 50% support, the trend line and the lower limit of the channel.

About the channel. Look at the graph. I’ve made a line through the 1.2798 and 1.2834 peaks and I’ve inserted a parallel line at the 1.2351 minimum. Through the 100% lower I’ve put another line (2 canals from the upper line).

When trading according to a pinbar, traders use pending orders. If the nose is heading upward – a SellStop, if down – a BuyStop. In our case the nose is heading downwards, so we’ll use a BuyStop order. The order should be put above the upper shade of the candle plus 2 points at 1.2206. Trading period zone: 1.2350-1.2400.

The primary protective stop is set at the pinbar’s minimum minus 2 points. At the close of each subsequent candle, the stop loss will shift to a new minimum minus 2 points. Doing this will help to gradually lessen the size of losses. Before implementing this strategy, weigh up your risks. Not every weekly bar will allow a stop at 264 points. In order not to miss the trade, you can reduce the lot and observe all the rules of risk management.

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Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.

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