Commodity Trendline Break

After commodities price has moved in a certain direction for an extended period of time within a channel it reaches a point where it stops moving within the channel. When this happens we say that the commodity trend line has been broken.

Since the line is point of support or resistance then we expect the commodity market to move toward the opposite direction. When this happens traders will close the commodity orders which they had bought or sold. This is referred to as taking profit.

Up commodities trading trend Reversal

When commodities trading price breaks-out upwards line (support) the commodity market will then move down

This signal is considered to be complete with the creation of lower high or lower low. This also provides a trading opportunity to go short once it is broken.

Down commodities trading trend Reversal

When commodities trading price breaks-out downwards line (resistance) the commodity market will then move up

Downwards Channel break

This trading signal is considered to be complete with creation of a higher low or higher high. This also provides a trading opportunity to go long once it is broken.

NB: Sometimes when commodities trading price breaks its commodity trend it might first of all consolidate before moving in the opposite direction. Either way it is always good to take profit when the commodity market direction reverses.

To trade this commodity setup as a trader once you open a new trade in direction of the commodity trend reversal the commodities trading price should immediately move in that direction, in a commodities trading price break-out manner. This means that the commodity market should immediately move in that direction without much of a resistance.

If on the other hand the commodity market does not immediately move in direction of the commodities trading price breakout then it is best to close out the trade because it means that the commodity trend is still holding.

Another tip is to wait for the commodity trend line to be broken & for the commodity market to close above or below it so as to confirm this commodities trade signal.

What happens is that most traders open trades waiting for a reversal even before the commodity trend is broken, only for the commodities trading price to touch this line and for the current market direction to hold and the commodity instrument to continue with the current market direction.

Therefore, when trading this commodity setup it is best to wait until the breakout has been confirmed by commodities trading price closing above or below the commodity trendline, depending on the direction of the market.

• Upwards Market Direction Reversal - this commodity signal is confirmed once the commodity market closes below this upward line, this should be the correct time to open a sell short trade, so as to avoid a commodity whipsaw.

• Downwards Market Direction Reversal - this commodity signal is confirmed once the commodity market closes above the downwards line, this should be the correct time to open a buy long trade, so as to avoid a commodity whipsaw.

Combining With Double Tops or Double Bottoms Commodities Trading Chart Patterns

A good trade setup to combine this commodity setup with is the double tops and double bottoms commodity patterns. Read Double Top & Double Bottom Chart patterns Guide.

This setup should already have formed before the commodity trend break signal. Because these double tops and double bottoms are also reversal commodity signals, then combining these two setups will give the trader a good probability of avoiding a commodity whipsaw.

In the above chart screenshots these commodity setups can be confirmed to have formed even before the reversal commodity signal appeared.

First Example of Upward Direction Reversal - the Double tops pattern had already formed before the commodity trend break signal appeared on the commodities chart.

Second Example of Downwards Direction Reversal - the Double bottoms commodities trading chart pattern had already formed before the commodity trend break signal appeared on the commodities chart.

Double Top or Double Bottom Combined With other Reversal Trading Signals