I'll be scouring the charts for "actionable masterpieces". These will be signficant chart patterns or set-ups that I feel are not only tradeable, but also have a high probability of making big profits with little risk. Whenever I spot an "actionable masterpiece", I will post an annotated chart (my chart art) along with an explanation. My goal is to help you learn how to spot these low ocurring but highly profitable "actionable masterpieces" yourself.
Sell GBP/USD
This pair attempted to reach 2.09 and got very close before sellers pulled it back down to 2.08. Traders are salivating the 2.10 level against the dollar, but it is very difficult to justify buying the pound at current levels given the negative economic outlook (poor housing data, slowing industrial production, etc.) Add on the credit-related stresses in the financial sector and the possibility of a rate cut, I'm looking for a big sell-off at these "high as a kite" levels.
On Thursday, the Bank of England (BOE) will have its interest rate meeting. I expect the BOE to spring a surprise rate cut. The market predicts they will wait until December but I have a feeling (due to weak recently released data) they will do it this week. This would definitely pound the pound!
There are spinning tops around the 2.890 level. There's also bearish divergence present. Has this pair topped out? I'm looking to go short but where should my entry be?
I've drilled down to the 1-hour chart to help me find a good entry point. But first let me find my stop loss (SL) and profit target (PT). My stop loss will be 2.0900. My thinking is if this pair breaks above its recent resistance of 2.0890, I was dead wrong about this pair going down so I should exit. My initial profit target (PT) will be 2.0560 which I mark as major support on the 4-hour chart. I've also noted 2.0700 and 2.0600 as possible exits and will have to watch price action to see if I may have to take profit early. As always, I will mention any trade adjustments in my comments section below:
Okay back to entries. I see three possible entries.
- If I'm feeling aggressive, I could short now at 2.0800. Of course my potential risk is a ginormous 100 pips but going in here guarantees I don't miss the boat if this pair freefalls.
- The oscillator is showing that this pair is "oversold" on the 1-hour chart. I could wait for it to possibly rise back up to minor resistance at 2.0825. This would lower my risk.
- The most conservative trade would be to wait for this pair to rise back up to a more solid resistance level at 2.0850. This gives me the lowest possible loss of pips if I'm wrong but what if this pair never comes back up to this level?
Depending on one's appetite for risk, those are my three possible entry scenarios. I'm going to go for the gusto and select my first choice buying at the fresh market price. I feel comfortable risking 100 pips to possibly make over 200 pips.
Sell GBP/USD @ 2.0800 | SL: 2.0900 | PT: 2.0560
