Price remains extended above the 20 SMA, so I will be watching for either a healthy pullback that supports a BRACE buy or a break and retest below Friday’s low that supports a BRACE sell.
As we head into the new trading week, I want to walk you through what I am seeing on USDCHF from a 4-hour perspective and what I will need to see before considering either a buy or sell opportunity.
One of the most important principles of BRACE is understanding that we do not predict market direction. Instead, we identify important levels, allow price action to develop, and then wait for the market to provide a valid setup.
At this point, the market is approaching several significant reference levels that could create opportunities in either direction. However, because the market has not yet opened, we do not know which scenario will ultimately develop.
Current Market Context
From a 4-hour perspective, price remains well above both the 20-period and 200-period moving averages.
The 200 SMA continues to provide bullish market context, while the 20 SMA remains my primary active moving average for trade decisions.
Price is also trading above last month’s high, which is a level I will continue monitoring closely as we move into the new week.
What stands out most to me is how extended price currently appears from the 20 SMA. This does not mean price must immediately reverse lower, but it does suggest that chasing the market at current levels would not fit my trading plan.
Instead, I want to allow price action to develop and see whether the market creates a valid BRACE opportunity.
What I Would Need To See For A Buy
At this stage, a buy remains the direction that aligns with the current 4-hour trend.
However, I am not interested in buying at current prices simply because the market has already made a strong move higher.
For a buy opportunity, I would like to see price either consolidate or retrace in a healthy manner before producing a bullish confirmation signal.
Ideally, I would like to see the market respect support levels, allow the 20 SMA to catch up, and then produce a bullish confirmation candle that supports continuation of the existing trend.
If that occurs, I would then evaluate a BRACE buy setup.
What I Would Need To See For A Sell
Although the larger 4-hour trend remains bullish, I am open to a sell opportunity if market structure begins to shift.
For that to happen, I would need to see evidence that sellers are gaining control.
Specifically, I would want to see price break below Friday’s low and then retest that level from underneath.
If that retest is followed by a bearish confirmation candle, a BRACE sell opportunity may begin to develop.
Even then, I would initially view that trade as a retracement within a larger bullish trend rather than a confirmed long-term trend reversal.
Using The 1-Hour Chart
Although my analysis begins on the 4-hour chart, traders are not restricted to executing exclusively from the 4-hour timeframe.
The 1-hour chart may present opportunities before they become visible on the 4-hour chart.
For example, if bearish structure develops on the 1-hour chart and satisfies all BRACE requirements, traders may find a valid sell opportunity there before a complete 4-hour setup develops.
Likewise, the 1-hour chart may provide an earlier bullish entry following a pullback.
The key is that regardless of timeframe, market structure, confirmation, and execution must still follow BRACE principles.
Dropping to a lower timeframe should never mean lowering the quality of the setup.
What I Am Watching Most Closely
At this moment, my primary focus is not on predicting direction.
My focus is on watching how price behaves around last week’s high, last week’s low, Friday’s high, Friday’s low, and last month’s high.
These are the levels that will help determine whether buyers remain in control or whether sellers begin creating a meaningful retracement opportunity.
If price pulls back, holds support, and produces bullish confirmation, I will be interested in a buy.
If price breaks below Friday’s low, retests it, and produces bearish confirmation, I will be interested in a sell.
Until one of those scenarios develops, there is no trade.
Sometimes the best position a trader can take is patience.
The market has not shown its hand yet.
Now we wait for structure, confirmation, and execution.
Trade well,
D. Michele
State of Mind Trader
