Bearish Wedge on the Cable – Closed Trade

Closed Trade: 2009-11-25 20:30

PoD Chart

Oh shucks! What a bummer! Looks like holding on to my 2nd position didn’t work out too well for me. Dollar bears came out in full force and pushed the dollar to a 15-month low! Apparently, some officials from Russia and Canada hinted that they may diversify their currency reserves away from the US dollar.

While I’m a little disappointed that things didn’t go my way, at the very least I was able to lock in profits by moving my stop loss to breakeven. I’m glad I was able to foresee that risk appetite could come back into play so I adjusted accordingly.

1st position profit target hit at 1.6500, 2nd position closed at breakeven at 1.6650.

1st Half: +150 pips
2nd Half: +00 pips

Total +0.50% Gain

Trade Update: 2009-11-23 21:59

Hey everybody! It looks like my first profit target was hit as risk aversion was strong on Friday! The dollar gained across the board, which helped me out as cable fell to as low as 1.6461. Yesterday however, it seemed that risk appetite came back into play, causing the pair to retrace. I think I have to readjust, so I’m going to move my stop loss to my entry point in order to create a risk free trade. Let’s see how this pans out!

Trade Idea: 2009-11-19 23:01

As I was reading up on economic news, the minutes of the latest BOE monetary policy committee meeting caught my attention. The policymakers had a split decision regarding their bond purchase program, hinting that overall sentiment for the pound could be bearish. Majority of the policymakers are still uneasy about the UK’s economic prospects, believing that further stimulus is needed to ensure growth.

UK will be releasing its retail sales report later today. After staying flat in August and September, sales at the retail level are projected to post a 0.6% uptick in October. However, judging from the downward trend in retail sales starting June this year, the indicator could resume its decline and fall below the consensus for October. Meanwhile, UK’s public sector net borrowing is expected to slide from 14.8 billion GBP to 6.7 billion GBP in October, providing further downward pressure for the pound. Risk aversion could prolong its stay in the markets if the US economic reports due later, namely the weekly jobless claims and Philly Fed manufacturing index, come in weaker than expected.

PoD Chart

I took a look at a 4-hour chart of GBPUSD and what did I find? A rising wedge formation! I connected the bottoms on October 13, November 3, and November 12. I also drew a resistance line linking the tops on September 24, October 23, November 9, and November 17. And viola! A rising wedge! Based on my previous readings, this pattern should be taken as a strong technical sell signal as it could indicate that the pair is about to turn its corner.. to the downside! Shorting when it breaks down sounds like a good trade idea for me.

So here’s what I will do:

Short at 1.6650, profit target 1 at 1.6500, profit target 2 at 1.6300, stop at 1.6800. I will be risking 1% of my account in this trade.

10 comments

  1. ssharma

    I am a newbie and I have been following your blog with great interest and hope to learn from your experience
    Would you please explain the meaning of
    profit target 1 at 1.6500, profit target 2 at 1.6300, stop at 1.6800.

    Why don’t you take only one profit target and get out at the first one. What is the strategy behind having 2 pts

    Thanks

    “Short at 1.6650, profit target 1 at 1.6500, profit target 2 at 1.6300, stop at 1.6800. I will be risking 1% of my account in this trade.”

    Reply
  2. ssharma

    I am a newbie and I have been following your blog with great interest and hope to learn from your experience
    Would you please explain the meaning of
    profit target 1 at 1.6500, profit target 2 at 1.6300, stop at 1.6800.

    Why don’t you take only one profit target and get out at the first one. What is the strategy behind having 2 pts

    Thanks

    “Short at 1.6650, profit target 1 at 1.6500, profit target 2 at 1.6300, stop at 1.6800. I will be risking 1% of my account in this trade.”

    Reply
  3. Hucklekiwi PipHuck

    I put two profit targets so that I can manage my risk better. Assuming the trade goes my way, it allows me to lock in profits and create a risk-free trade on my other position enabling me to ride the waves! I believe it’s a nice way to make sure I don’t miss out on any major move!

    Reply
  4. Hucklekiwi PipHuck

    I put two profit targets so that I can manage my risk better. Assuming the trade goes my way, it allows me to lock in profits and create a risk-free trade on my other position enabling me to ride the waves! I believe it’s a nice way to make sure I don’t miss out on any major move!

    Reply
  5. MonsterTrader

    Huck great stuff, I like how your progressing :)

    I’ve got a question though, where do you get access to the BOE minutes? Can you post the link pls?

    Reply
  6. MonsterTrader

    Huck great stuff, I like how your progressing :)

    I’ve got a question though, where do you get access to the BOE minutes? Can you post the link pls?

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>