Over the last couple of months, most of the majors have struggled to give a clear direction. Trends were either non-existent or very weak. There was a lot of trading that was within defined ranges or where consolidation was occurring. Longer term traders were looking for a breakout of the ranges or a break from the consolidating.
We are now seeing this. We are seeing some solid support/resistance levels broken in the last week or two. In order for any longer trend to continue, support/resistance levels need to be broken. It’s OK if a temporary support/resistance forms, but that was not happening for the past couple of months. During that time, those support/resistance levels kept holding over and over. This caused trends that looked like they were forming or strengthening to be stopped, dead in their tracks.
Even though some pairs were showing trends at times, the level of support/resistance would always be looming in the near future. Now that those levels are broken, we are also seeing the breaks as confirmation of patterns that have formed over the last couple of months. These patterns range from a double top to a triple bottom to a descending triangle. These patterns suggest some longer term target levels that would require trends to continue.
For longer term trend traders, this is a welcome sign.
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