If the cable sells off again, here’s the timeframe to watch…

The cable has reached the 34EMA low which is the bottom line of the Wave on the daily chart. When the market cycle is down this is typically a great point at which to initiate a short position. Normally that’s the plan BUT…

The cable can be a bit of a drama queen can’t it?

Look closer at the daily chart and it’s apparent that prices can and have climbed up into and through the resistance of the Wave before selling off.

So rather than play a swing short off a bounce (sell strength in an overall downtrend) it may be wiser here to short a breakdown: Enter the four hour chart!

GBP240_2009-01-29_1450.png

The play would still be a short but the rising wedge pattern on the 240 will set up a reversal short — as opposed to a swing short on the daily (below) — and take advantage of momentum to the downside.

1-29-2009 6-08-41 PM.gif

Remember looking at multiple time frames allows us to dissect price action and find the best set up!