Double Top on the AUDUSD – Trade Closed

Trade Closed: 2010-01-28 22:16

PoD Chart

Tally-ho! I caught some pips on the AUDUSD! Though, I think this trade has gone long enough. With the US advance GDP coming out later and the pair finding some significant buying support at 0.8900, I decided to lock in my profits and look for opportunities elsewhere.

To be honest, I was scared as heck holding on to this trade. The pair kept finding support at 0.9000, which got me to think that buyers could soon overpower the sellers and cause a major rally! Fortunately, risk aversion was strong, giving me a good reason to hold on to my trade.

1st half closed at 0.9000: +150 pips / +0.75%
2nd half closed 0.8925: +225 pips / +1.125%
Total: +1.875% gain

Trade Update: 2010-01-21 20:24

Success! The AUDUSD, after breaking out of the double-top (or quasi-head and
shoulders for some) my profit target was hit. From the looks of it, the pair still has some gas to go lower so I think I’ll keep this trade open for a bit more. As usual, though, I’m going to move the stop on my remaining position to my entry point for a risk-free trade.

Trade Idea: 2010-01-18 22:11

PoD Chart

Good day ladies and gentlemen. Did ya’ll have a great weekend? I know I did… I was able to catch up with an old friend of mine over dinner last Saturday. I found it great on how I could still talk to her the exact same way as four years ago. There are really some things that never change. Anyhow, enough of my personal life, it is a brand new trading week so I’m going to get right on it!

I took a look at Happy Pip’s trade update and noticed that she mentioned a possible double top formation on the AUDUSD. I decided to pop open my charts and voila – it does look like a double top to me! Now, I’ve never traded a double top before but from reading the description in Babypip’s Forexpedia page, I read that it’s a bearish reversal pattern.

In my opinion, it also fundamentally makes sense. Despite the RBA’s upbeat economic outlook, consumer’s sentiment has been falling for the past four months. The latest Westpac consumer sentiment figure dropped by 3.8% after already sliding by 2.6% during the previous period.

I think traders will keeping an eye out on China’s 4Q GDP release on Thursday. Australia, as Forex Gump keeps telling me, is one of China’s major suppliers of input materials so a 10.5% expected GDP growth and a 19.6% annualized industrial production could push the Aussie higher. Though something tells me that these projections are too high so instead of going long, I’m going to short the pair when it breaks out to the down side.

I’m looking to short below last week’s low, which is also the below the neckline of the two tops. My stop loss will be at about 100 pips, with my targets set at 0.9000, a former area of interest, and 0.8800, the next major support level.

Short AUDUSD at 0.9150, stop loss at 0.9250, take profit at 0.9000 and 0.8800. As I always do, I will risk 1% of my account.

  • PipCounterz

    From the point of view of an Australian, I trust the Westpac consumer confidence indicator a lot more than some of the other lagging indicators like inflation and unemployment etc. I am going short myself at the moment as well.

    Australian’s by $$ are very highly leveraged and thus every interest rate rise we have suffered has dragged up the interest costs greatly. I have even noticed it myself on my own mortgage. The other thing to consider is that I believe in the US fixing your interest rates is quite popular whereas in Australia the majority of consumers are on a flexible interest rate so changes in monetary policy are sensitive to our hips pockets.

    In my view that RBA are jumping the gun by raising rates 3 months in a row the way they have and everyone I know is cutting back on their spending again.

    Good Luck!

  • colstreamer

    Hey Huck, I noticed the double top too, late last week I think it was, my trade has already been triggered. I went short at 0.9190 with stops at 0.9300 and TP at 0.9100 and 0.9000. I figured the neckline of the double top was around 0.9200 maybe I was too ambitious as my trade got triggered and the price subsequently went north! LOL! Still I put this down to the Martin Luther King bank holiday in the US. I too agree with Forex Gump who posted an interesting blog in mid december concerning the Aussie and my daily chart still shows stochastics to be overbought.

    I got my fingers crossed for both of us. ;-)

  • PipCounterz

    From the point of view of an Australian, I trust the Westpac consumer confidence indicator a lot more than some of the other lagging indicators like inflation and unemployment etc. I am going short myself at the moment as well.

    Australian’s by $$ are very highly leveraged and thus every interest rate rise we have suffered has dragged up the interest costs greatly. I have even noticed it myself on my own mortgage. The other thing to consider is that I believe in the US fixing your interest rates is quite popular whereas in Australia the majority of consumers are on a flexible interest rate so changes in monetary policy are sensitive to our hips pockets.

    In my view that RBA are jumping the gun by raising rates 3 months in a row the way they have and everyone I know is cutting back on their spending again.

    Good Luck!

  • colstreamer

    Hey Huck, I noticed the double top too, late last week I think it was, my trade has already been triggered. I went short at 0.9190 with stops at 0.9300 and TP at 0.9100 and 0.9000. I figured the neckline of the double top was around 0.9200 maybe I was too ambitious as my trade got triggered and the price subsequently went north! LOL! Still I put this down to the Martin Luther King bank holiday in the US. I too agree with Forex Gump who posted an interesting blog in mid december concerning the Aussie and my daily chart still shows stochastics to be overbought.

    I got my fingers crossed for both of us. ;-)

  • whit

    Huck, as a newbie myself I just awanted to say thanks for you observation on this one. My trading plan is still evolving so the point to check the chart patterns on the 4hr/daily is a good addition. Now to work on my pattern recogntion.

    Whit

  • whit

    Huck, as a newbie myself I just awanted to say thanks for you observation on this one. My trading plan is still evolving so the point to check the chart patterns on the 4hr/daily is a good addition. Now to work on my pattern recogntion.

    Whit

  • Huck

    You guys! Thanks for your input… Glad to hear other people share the same trade idea. Kinda ups my confidence a bit! Sadly, it looks like my entry won’t trigger anytime soon as the neckline held. I guess it’s time to look for trade opportunities elsewhere…

  • Huck

    You guys! Thanks for your input… Glad to hear other people share the same trade idea. Kinda ups my confidence a bit! Sadly, it looks like my entry won’t trigger anytime soon as the neckline held. I guess it’s time to look for trade opportunities elsewhere…

  • Babysteps

    Hello
    This my first post here,
    Nice trade i been in for days
    sell 0.9160 closed 0.90
    Have anther sell 0.9310 still in play as long term trade:-)

  • Babysteps

    Hello
    This my first post here,
    Nice trade i been in for days
    sell 0.9160 closed 0.90
    Have anther sell 0.9310 still in play as long term trade:-)

  • PipCounterz

    good on you for hanging in there!!

  • PipCounterz

    good on you for hanging in there!!