Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Dollar Trendline, Reverse Head & Shoulders Pattern

|Includes: CurrencyShares Euro Trust ETF (FXE)
aaronbasile.wordpress.com/2010/11/24/dollar-trendline-reverse-head-shoulders-pattern/


The dollar recently made two bullish formations on the 6 month chart and may be confirming the recent market reversal. This comes on news of a weak Euro due to concerns of an Irish bailout and talk of solvency issues in Portugal.

The first bullish indicator is the breaking of the former downward trendline. This normally wouldn’t be enough to confirm anything but in recent weeks it appears that we’ve formed a reverse head and shoulders pattern as well. The breakout through the price channel makes this a very strong indicator in my opinion.

Subtracting the lowpoint of the head (75.63) from the highpoint of the neck (79.45) gives us 3.82, which we can add to the highpoint of the neck. That gives us 83.27 as our next price target, and ironically enough, 83.27 has acted as a resistance level more than once in the past year which adds to this chart’s credibility.