Inverse-Head-and-Shoulder Trade on USD/CHF – Trade Closed

Trade Update: 2012-2-23 02:49

Sadly, the potential head-and-shoulders pattern didn’t work out and ended up as a loser. It appears that I picked the wrong pair, as it was against the pound where the dollar rallied strongly, and not versus the franc. Drats!

USD/CHF 1-Hour Chart

Total Loss: -55 pips / -1.0%

Am I feeling bad about the loss? A bit, but I’m immediately over it. I believe that I managed my risk well, and didn’t take any more losses than I was willing to. I also did not deviate from my trading plan.

But I have to admit, I could’ve ask you guys for advice first before pulling the trigger. Waiting for an upside break, as some of you suggested, was a safer strategy. Oh well, next time I’ll be sure not to be too aggressive.

Thanks for all the feedback guys!

Trade Idea: 2012-2-21 22:25

Aha! It looks like EU officials weren’t able to impress the markets yesterday with their plan for Greece’s second bailout. Will the dollar rally soon?

I saw yesterday’s Daily Chart Art and the setup on USD/CHF caught my attention like Channing Tatum in the movie The Vow *giggle*.

USD/CHF 1-Hour Chart

Keeping close tabs on the pair, I noticed that on the 1-hour chart, it looks like an inverse head-and-shoulders has materialized around the major support. This is the same pattern that Big Pippin pointed out on the 4-hour timeframe.

Since an inverse head-and-shoulder pattern that is located at the end of a downtrend usually indicates a reversal, I have decided to be bold and enter at market (.9130). Yeah, I know that the School of Pipsology tells us that waiting for a neckline break before jumping in on a trade is usually the better idea with this chart pattern.

However, I didn’t want to miss another good trade like what happened with GBP/USD last week. Don’t worry, I promise to manage my trade carefully. I’ll probably just add another position once the pair breaks the neckline resistance around .9150.

One thing that I am also banking on is that the market will probably be very hesitant in selling this pair. The Swiss National Bank (SNB) has mentioned repeatedly that they are committed to keeping the value of their currency in check. They are determined to defend 1.2000 and EUR/CHF, which I think has an indirect effect on USD/CHF.

The positive expectations on the U.S. existing home sales report could also help my trade. It is slated to print 4.66 million, higher than the previous month’s 4.61 million.

To recap, here’s my game plan:

Buy USD/CHF at market (.9130), stop loss below yesterday’s low (.9075), profit target yet to be determined. As usual, my risk is 1% of my account.

XOXO,

Huck

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  • cda08

    its better not to take entry untill in 4H chart it breaks either 0.9141 for upper side and holds a few pips above or breaks below 0.9089 and holds a few pip down that level, in between those two price tags this pair currently moving up and down similar like consolidation, at present price now : 0.9127, keep an close eye on that.
    thanks

  • Raja

    it is very  ambitious entry. prices are being rejected by sma 50. it was better to wait for clear indication of buy signal or should have entered at or near the support level when pruices were being rejected by the support.

  • cda08

    what i said, remember 0.9141 is upper line of rejection, and it proved me was right, and  support i told 0.9089, well as per daily trend the pair just moved and crossed the line and now travelling below 0.9089, current price is 0.9081, lets see what happen next.

  • John1020

    I don’t know…..have you had a glance at the weekly chart on this pair? Think you may have jumped the gun a bit on this; the odds on this going up don’t seem more than 50:50 at the moment, which wouldn’t be good enough for me.
    But good luck with that, hope it does work out for you!

  • LT

    I would set the Buy order at 0.9150 to get a confirm of the SMA breakout. Target 0.92, SL 0.91.
    Thanks.