Cross-Eyeing: Evening Star on EUR/CHF – Trade (finally) Closed!

Trade Closed: 2011-03-01 00:40

EUR/CHF chart

As I pointed out last week, I decided to wait it out a bit and see some follow through after the hammer candlestick formed last Thursday. And what did we get?

An inverted hammer and a spinning top! Two more candles indicating a potential reversal!

It looks like those former areas of interest at 1.2700 and 1.2800 are just too tough to break through, and with Stochastic in oversold territory and starting to crossover, I think selling pressure is done for the meantime.

Fundamentally, I think the dynamics of what helped pushed this pair much lower have changed a little. The euro has been gaining support thanks to concerns about inflation. People are starting to believe that the ECB will be raising rates sometime this year. With the Fed more inclined NOT to do the same, it seems that the market is pricing in an ECB rate hike before the Fed, which is helping EUR/USD rise. So while the franc remains strong, broad euro strength is keeping EUR/CHF from heading lower.

With all that said, I think it’s about time to close my position and take my profits. Besides, 259 pips ain’t so bad right??

Here’s a recap of this trade:

Closed EUR/CHF short position at 1.2831: +259 pips/ +0.86%

In hindsight, I think I could have went with a tighter stop loss on this trade. After all, it was a trend line play and there was a solid candle stick formation. Still, I didn’t expect EUR/CHF to shoot down so quickly. I still think that the franc is strong, so I will consider reentering on a short, just as long as the signals all line up.

Overall, I think I played this trade out pretty well. I think my analysis was sound and I’m very happy that I jumped on that evening star formation right when I spotted it. This was a good win to end the month and hopefully I can keeping knocking some out of the park over the next few months.

Thanks for checking out my blog everybody!

Trade Update: 2011-02-22 02:20

EUR/CHF chart

The franc has been on a killer run lately across the charts, which has helped out my EUR/CHF tremendously. I’m up a good 300 pips now! Boo yeah!

Still, I’m feeling a little cautious right now. First of all, the pair failed to close the 50.0% Fib and a key resistance turned support area around 1.2780. Second, Stochatic is also in oversold conditions.Third, a hammer candlestick has also formed, which is considered to be a reversal candle. Are the bulls about to jump back in?

I was actually thinking of adding to my position, but that candle stick has got me a little bit worried. For now, I’m gonna sit back and see how today’s candle forms before I make a decision. If we see a bullish green candle, it may be time for me to cut this trade short and call it a night.

On the other hand, if selling pressure sticks like Gary Payton’s old school glove like defense, I may end up adding half a position to this trade.

Trade Update: 2011-02-22 01:46

EUR/CHF chart

+260 pips and counting!!! This trade just keeps getting better and better. Needless to say, this trade has got me all pumped!

Yesterday marked another big drop in EUR/CHF as a run of risk aversion led traders away from the euro and into the safety of the franc. Civil unrest in Libya, Japan’s debt rating downgrade, and a 6.3-magnitude earthquake in New Zealand killed risk appetite and made the franc was one of yesterday’s biggest gainers.

On top of that, the franc had the backing of solid trade balance data. Exports growth outpaced that of imports in January to widen Switzerland’s trade balance from 1.26 billion CHF to 1.96 billion CHF.

But the euro didn’t go down without a fight. Better-than-expected German consumer confidence data and hawkish words ECB member Mersch helped it recover a bit of its losses. But the move wasn’t enough to make me sweat. You know me – I’m always calm, cool, and collected!

So far, the pair isn’t showing any signs of a reversal yet, but now’s not that time to get cocky. I decided to pop up the Fibonacci tool to help me find areas where price could stall. As it turns out, price is currently right above the 50.0% Fib, which lines up with the 1.2800 handle as well. This also happened to be a resistance area in the past.

In addition, the 61.8% Fib also lines up to a major round figure at 1.2700. What’s more, it was also a resistance point before! Could these levels become resistance-turned-support areas?

I’ll be watching the pair closely and I may even consider taking some profits off the table today because ECB President Jean-Claude Trichet is scheduled to speak up at 5:00 pm GMT. If Mersch’s words were able to move the markets, what more Trichet’s, right?

Trade Update: 2011-02-18 01:46

EUR/CHF chart

Booyeah, baby! Four bearish daily candlesticks and counting! Things have been going silky smooth since I entered this EUR/CHF trade on Tuesday… The pair has dropped three days in a row since then!

Although the euro has remained steady versus the dollar and yen, the franc has been the big winner lately in the forex arena. It’s tough to gauge what the market is really focusing on right now.

The franc did benefit from risk aversion yesterday, as tensions flared up in the Middle East as Iranian warships entered the Suez Canal. So, thanks to general dollar weakness and a mini run of risk aversion, we saw the franc soaring up the charts.

This of course, has been great for my trade as I am now up a solid 160 pips as I write this. With the pair now below the 1.3000 handle, I’m feeling pretty confident about this trade as it has also broken a rising trend line on a lower time frame.

Still, with the weekend coming up and G20 talks on the docket, I think I’ll move my stop to breakeven. I believe this will still give my trade enough room to breathe and withstand any short-term retracements.

I’m also considering adding to my position if the pair breaks past recent lows at around 1.2775. This has served as a support level in the past, and it fails to hold this time, it could be a sign that this pair is headed to test the all time lows just below 1.2500!

But until the pair reaches that level and hits my profit target, I’m gonna sit tight and let this baby ride!

Trade Idea: 2011-2-15 2:24

EUR/CHF chart

First, let’s start with the fundamentals.

Euro zone data hasn’t been too hot recently as we’ve been getting some mixed results. While the unemployment rate dipped to 10.0%, other data has been dismal, more specifically retail sales (decline of 0.6%) and last week’s German factory orders (-3.4%) and industrial production (-1.5%) figures.

Meanwhile, European debt fears appear to be resurfacing, which is a key reason why the euro lost out yesterday. There are concerns about how the Irish government’s new ruling party is trying to renegotiate its bailout terms. In addition, Bundesbank President Axel Weber’s decision to forego taking the ECB presidency when Trichet steps down has also raised concerns on the ECB‘s stability.

I feel that these concerns may weigh heavily on the markets, and could send the euro lower in the long term, especially if we receive news about further bailouts of Portugal and Spain. Remember, both these countries’ fiscal situations are just as bad, if not worse, than Ireland’s. If rumors begin to circulate that either of the two will ask for a bailout, it could send the euro crashing lower.

As for the technical aspect, there’s a lot to like about this setup.

After slowly climbing up the charts, EUR/CHF seems to have found resistance at the 61.8% Fibonacci level. What’s more is that an evening star pattern has formed, which is a strong reversal signal! Stochastic is also deep in overbought territory, but has just crossed over, indicating that buying pressure may be subsiding.

Are sellers gonna jump back in on this down trend? I’m not 100% sure, but I think the fundamental and technical aspects of this trade are sound enough to act upon, so I jumped in at market!

Here’s how I set the trade up:

Short EUR/CHF at market (1.3090), stop loss at 1.3390, take profit at 1.2450.

Since my profit target is quite a distance away, I may add to my position if and when conditions are favorable. Given the long-term nature of this trade, this may go on for a while. Keep yourself updated by following me on MeetPips.com and Twitter!

  • monstapips

    lookin good so far buddy. you got a scare yesterday though on “jawboning” by the SNB haha.

  • monstapips

    lookin good so far buddy. you got a scare yesterday though on “jawboning” by the SNB haha.

  • jenesaisquoi

    Great trade! It must be up 200 pips or so by now!

  • jenesaisquoi

    Great trade! It must be up 200 pips or so by now!

  • Cyclopip

    Thanks for the comments fellas! Looks like the franc is really killin’ it right now. Now I’m thinking whether I should add to my position.

  • Cyclopip

    Thanks for the comments fellas! Looks like the franc is really killin’ it right now. Now I’m thinking whether I should add to my position.