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The trap we’re going to look at today is what I refer to as an outside candle trap, which occurred in this area here. Traders at the hard right edge would’ve been drawn in by this move up, and as price breaks this prior high, it reverses, trapping those traders long. Now, obviously this is a Brexit trade, and if you think about the context prior to the trap occurring, the markets are actually very bullish that the UK would remain inside the EU.
But of course as we know by now, that’s not what happened, so this would’ve caught a lot of people offside. So, if we get a pullback in and around this area here, this looks like a pretty good place to get short. Prefer the upper end of this range or put the 79.840-level, because I think some stop losses will be hunted in and around this area here before we head lower. So, it may just pop its head through and then follow through to the downside.
This is obviously a good bet to the downside as it’s continued chaos geopolitically after the fallout from Brexit, so this trade makes a lot of sense as commodities won’t do so well as the stock markets tank and the JPY is a safe haven play.
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