Last week I focused on the forming Ending Diagonal on the EUR/USD and suggested that if the pattern was correct, there would be no subtlety in the move down once the top was in place. Indeed the assessment was correct and subsequently the pair has now fallen over 400 Pips in little more than two days. I heard it described as; it came down without touching the sides!

The next challenge is to now be alert to the next possibility of buying or selling depending on how the pattern will unfold. Let's address what is common following Ending Diagonals.

The name ending implies we have completed a substantial move and at least a temporary top is in place. So at the very least we should expect a total correction from where the pattern began forming. If we are also at the end of a longer cycle, then an even greater correction will take place.

The way to trade this is to expect a trading channel to form and to look at barriers on the way down and to Sell after Bounces as the move down corrects, reducing your position size as we approach lower levels below the Ending Diagonal pattern.

It will be at this stage that we will likely see a reversal that will either be a correction of the move down, or a new move up towards a potential double top or marginal new high.

So for now, sell the reversal off the bounce when a definable channel looks to have formed. For those of you that are impatient, you could consider a buy if you can identify when the currency pair turns to correct. Just remember, this is like trying to catch a falling knife; lot's of fun when you do it right, but plenty of blood when you miss.

Good trading!
Pierre