In early 2014 Australian dollar futures put in a low of 0.8632 and proceeded higher for the next couple months. In September the price broke lower out of a multi-month consolidation phase and sharp decline has brought the price back to support near 0.8632.
Since this region causes a reversal already this year, traders should consider the possibility that it could act as support again.
Figure 1. Australian Dollar Futures (6A) Daily Chart
If already short from the early September breakout, consider utilizing a trailing stop or drawing in stops to $0.8844 or lower.
If not already in a position, the 0.8632 support isn't necessarily an entry price, rather it's an area where a trade could develop.
A trade setup occurs if the price consolidates near support, moving in a mostly sideways fashion for at least four to five days. After (and if) the price consolidates for a number of days, take a trade following a breakout of the consolidation in either direction.
The downside consolidation break is valid because it indicates a continuation of the longer-term downtrend.
The upside consolidation break is valid because it indicates a bounce based on support holding once again.
Place a stop loss just outside the opposite side of the consolidation from the breakout, should the consolidation develop and provide a trading opportunity. Set the stop as a trailing stop; given sharp recent movement the purpose of the consolidation breakout trade is only to capture a strong surge in movement following the consolidation near a key level.