Looks like the Aussie 200 index on the hourly chart is setting up for a head and shoulders reversal.

We've seen weakness as soon as the short-term highs were hit on Thurs, followed by a near bearish engulfing pattern. Throw in the bearish divergence seen on the daily stochastic, the rising Coronavirus cases and you have the potential for a pull back.

The risk reward on this trade isn't great, and that would depend on how you want to time your entry.

Do keep in mind this reversal trade is in the midst of a strong uptrend, that has been ongoing since early November, with the backdrop of US indices hitting record highs too.

AUS200 Index Head and Shoulders Reversal Pattern

Dec 20 2020

2