One pager positional report on NZDUSD

NZD/USD SELL @ 0.8550 CMP stop @ 1.8700 TGT 0-8350 – 0.8200 – 0.8050

                The double top is a frequent price formation at the end of a bull market. It appears as two consecutive peaks of approximately the same price on a price-versus-time chart of a market. The two peaks are separated by a minimum in price, a valley. The price level of this minimum is called the neck line of the formation. The formation is completed and confirmed when the price falls below the neck line, indicating that further price decline is imminent or highly likely.

The double top pattern shows that demand is outpacing supply (buyers predominate) up to the first top, causing prices to rise. The supply-demand balance then reverses; supply outpaces demand (sellers predominate), causing prices to fall. After a price valley, buyers again predominate and prices rise. If traders see that prices are not pushing past their level at the first top, sellers may again prevail, lowering prices and causing a double top to form. It is generally regarded as a bearish signal if prices drop below the neck line.

The time between the two peaks is also a determining factor for the existence of a double top pattern. If the tops appear at the same level but are very close in time, then the probability is high that they are part of the consolidation and the trend will resume. Volume is another indicator for interpreting this formation. Price reaches the first peak on increased volume then falls down the valley with low volume. Another attempt on the rally up to the second peak should be on a lower volume.

            From the above chart NZDUSD reverted from the level of 0.8726 forming double top formation and is nearing the support level of 0.8515 which is the neckline of the pattern and once the neckline is broken below 0.8515 will confirm the trend for the down side move. Currently its trading at 0.8540 level and on closing basis if neckline is crossed will open the door for 0.8350 – 0.8200 – 0.8050 level where the previous bottom will be tested at 0.8050 which was seen in Feb. 2013 where lower level we can wait for.