Does technical analysis work?

By 13/08/2021News
morning-news

Gold  1756,345
(+0,21%)

EURUSD   1,1739
(+0,06%)

DJIA  35407,50
(-0,04%)

OIL.WTI  68,535
(-0,52%)

DAX  15945
(+0,01%)

Back to our favourite pound/dollar chart. And see what has changed since the last newsletter. And once again we try to understand if technical analysis is working or not in the forex market.


GBP/USD

GBPUSD

We have purposely zoomed in on the D1 chart to capture the movements of the pound sterling over the last year. The chart shows an uptrend which has been forming for half a year. Then there was a successful breach of its lower boundary. Further this border of the channel turned from a support line into a resistance line. After its unsuccessful retests, the price moved down, finally burying the uptrend.
On July 21, there was a breakaway from the 200-day moving average. The up-corrective move, allowed an inclined level to form, which becomes the upper boundary of a new downtrending channel. Today we drew it for the first time on the chart.
• Notice how amazing the picture is. It looks as if the new channel is a mirror image of the old one. Even its widening is at approximately the same angle. The only difference is that the descending channel is slightly wider than the ascending one. This is quite natural, taking into consideration the rising volatility of the pound/dollar pair.
• Right now the price is near the upper sloping resistance line. If it holds, then a move to the lower boundary will begin. It is not yet on the chart and the downward movement, at some point in time, will form the lower shadow of the candle. Through this shadow we will extend the lower boundary of the falling channel.
So does the analysis work or not? In this case it is not crucial. The main thing is that many traders and investors believe that TA works. Which means that our subscribers can understand:
• Where a large number of stops are located
• Where downward and upward price movements are most likely to end (within this channel)
• And the signal that will give the opportunity to enter the trade with an excellent risk/profit ratio

16.00 University of Michigan Consumer Confidence Index for August in the USA


Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.