Trade Recommendation: CAD/SEK
The Canadian Dollar/Swedish Krona pair started its uptrend in June 2005 when it took out resistance of 6.00. The price action triggered the rounding bottom reversal pattern on the monthly chart. The breakout attracted a lot of momentum, which pushed the market to as high as 7.7192 in June 2010. In five years, the Canadian Dollar rose by almost 30% against the Swedish Krona.
Unfortunately for buyers at this level, trend followers and breakout traders started to take profits. This triggered a selling frenzy that drove the pair down to 6.257 in June 2011. While the pair managed to rally, it could only deliver a lower high of 7.144 in May 2012. The bearish price movement triggered a huge C wave that saw the market plummet to as low as 5.6669 in March 2014.
The good news for bottom fishers is that CAD/SEK has been rallying since. It even appears ready to restart another uptrend.
Technical analysis show that the Canadian Dollar/Swedish Krona pair has completed a corrective double three pattern. This pattern coincides with an ascending triangle pattern on the monthly chart. With two bullish patterns in sight, these increase the probability of a reversal.
The strategy is to buy the breakout at 7. If bulls take out the resistance, they will attract all the momentum they need to lift the market to our target of 8.00.
The process may take more than a year.
Monthly Chart of CAD/SEK
As of this writing, the Canadian Dollar/Swedish Krona pair is trading at 6.7988.
Summary of Strategy
Buy: Breakout at 7.00.
Target: 8.00
Stop: 6.87 after the breakout.
Featured image courtesy of Shutterstock.
