USDCAD—potential double bottom on daily chart

USDCAD sunk as low as 1.0225 in yesterday’s trading. The prior low in mid-October was 1.0214. If the pair is basing (as I have frequently written here in the past few months) it should not close below 1.0214. Therefore, a long position can have a fairly tight stop. If 1.0225 was the end of a wave two correction then the direction should be up with nearby resistance at 1.0290, 1.0375, and 1.0405.

You could also make a case that there is a double bottom forming since the two lows at 1.0214 and 1.0225 are so close to each other. Double bottoms require confirmation. In this case, confirmation won’t be until 1.0853, the high of the peak between the two bottoms. That’s quite a bit of wait for that and I’d prefer to try a long near the bottom. A definitive break below 1.0214 would be a sign to get out of longs.

Here’s the daily chart:



© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

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