Trade Idea: 2011-12-1 2:15
After that strong move up yesterday, I think that we could continue to see the bulls push the pair higher. I don’t want to get left behind, so I’m jumping on the first instance the pair gives me a good price.
From the chart above, I think my trade setup is pretty self-explanatory. GBP/USD is currently retracing, and with the Stochastic about to hit oversold territory, I think we may see the bulls buy the pair up again on a Fibonacci retracement level.
I know catching a bottom is tough, so I’m going to “scale in.” I will split my risk into two: one buy limit on 1.5650 (50.0% Fib) and another one at 1.5620 (61.8% Fib). I will ultimately target new highs at 1.5900, but I may take profit on part of my position earlier. I will consider my trade invalidated if price dips below 1.5600.
Looking at the forex calendar, I found out that the U.K. manufacturing PMI for October is an event risk for my trade. But I’m not that worried. As Pip Diddy said in his daily fundamentals report, higher-yielding currencies got a boost in yesterday’s trading thanks to the coordinated policy action by central banks. I have a feeling that there are still enough positive vibes from the statement to keep GBP/USD trading well above 1.5600 today.
So, here’s my plan:
Buy at 1.5650 and 1.5620, profit target at 1.5850, stop loss at 1.5550.
What do you think of my trade? Be sure to let me know what your thoughts are!