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When Support becomes Resistance!
By Mike Conlon | June 24, 2009
In my previous note today I mentioned that this morning was down for the Euro. As I was going through my charts I noticed something significant on EUR/USD. Earlier this month, I pointed out a technical pattern on this currency pair known as a “head and shoulders” pattern. The premise of the pattern is that when you draw the neckline it acts as support and if that support is breached it can become a pretty good short trade. Turned out to be a pretty good trade.
Now here we are, a couple of weeks later, and what was formerly short-term support has now become resistance! Let’s have a look… (click charts to enlarge)
As you can see from the charts, the area right around the neckline that had formerly been support has now become resistance and has held on two different occasions. This occurs often and is something that technical traders should be aware of. Short-term traders who like to trade “the range” can enter short positions below resistance with a stop placed just above.
Get ready for the FOMC announcement, just about an hour away!
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