EURJPY 1H 1). Trend Continuation: An established trend often continues after a pullback. In an uptrend, prices typically pull back to a support level before resuming the upward movement. Similarly, in a downtrend, prices pull back to a resistance level before continuing downward.
2). Fibonacci Retracement Levels: Pullbacks often retrace a predictable portion of the prior impulse move, typically to key Fibonacci levels such as 38.2%, 50%, or 61.8%. These levels are used by traders to identify potential reversal points.
3). Volume Analysis: During a pullback, trading volume often decreases compared to the previous impulse move. A subsequent increase in volume can indicate the resumption of the trend and the start of a new impulse move.
4). Chart Patterns: Certain chart patterns, like flags or pennants, can indicate a brief consolidation or pullback before the trend continues. These patterns provide visual confirmation of potential continuation.
5). Momentum Indicators: Indicators like the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD) can signal when the pullback is over and the next impulse move is beginning. For instance, an RSI bouncing off a support level or a MACD bullish crossover can indicate the end of a pullback.
6). Candlestick Patterns: Specific candlestick patterns (e.g., hammer, engulfing patterns) at the end of a pullback can signal the resumption of the trend. These patterns indicate a potential reversal of the pullback.
By analyzing these criteria, traders can increase the likelihood of accurately predicting the resumption of an impulse move after a pullback, thereby making informed trading decisions. 🤞🤞