In this post, we are going to give a detailed analysis of a recent swing trade. If you haven’t read the post on my Swing Trading System for H4 timeframe, I would suggest that you read it before you continue reading the post below. This will help you in understanding the post below in a better manner. Take a look at the following screenshot.
As you can see in the above screenshot, RSI, Stochastic and the MACD all three are showing strong bullish divergence. In order to make an entry we shift to the H1 timeframe. H1 timeframe is also showing bullish divergence on RSI, Stochastic and the MACD. We draw a minor trendline as shown and wait for the price to break it before we make an entry.
Price finds support at 1.50075 on 29th May. Just after one candle, the minor trendline is broken and we make an entry at 1.50400. The stop loss is at 1.50000. So our risk for this long trade is only 40 pips. That’s it.
If you take a look a the daily chart also, you will see the Stochastic and the RSI showing bullish divergence. So we have identified the trade setup correctly! The price moves up away from the stop loss. Since the Stochastic is in a oversold region on the daily timeframe, we can expect the market to move by around 500 pips before it turns around. We will continue in the trade as long as the EMA10 (Red) stays above EMA34 (yellow) on H4 timeframe. EMA10 (Red) crosses above EMA(34) and stays above it. Take a look at the following screenshot!
Just above the red arrow, price tried to retrace but could only touch EMA34 (Yellow) before it starting climbing up again. We move the stop loss to 1.51300 on the first position and open the second position at 1.51800. On the first position we now have a guaranteed profit of 90 pips while the risk on the second position is 50 pips. We continue in the trade as said above as long as the EMA10 (Red) is above EMA34 (Yellow). Take a look at the following screenshot!
A bearish divergence is appearing. Price finally found resistance at 1.57509 on 19th June. We close both the positions at 1.57400 with a profit of 700 pips on the first position and a profit of 560 pips on the second position. We made a net profit is 1260 pips in 21 days. Read the post on how to trade the Head and Shoulder Pattern!