No Trade: 2011-11-17 15:15 ET
Good afternoon! It looks like my trade idea for this week is a “no-go” as European fears and weak BOE rhetoric continued to push capital into the Greenback without a hiccup.
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
As I mentioned above, fears in Europe over the current sovereign debt crisis continues to grow and push the markets into risk-off mode, benefiting the usual “safe haven” assets like the Greenback, Japanese Yen and US Treasuries. In the UK, lower inflation numbers and rhetoric from Bank of England Governor Mervyn King that Europe’s crisis may spark more stimulus from the BOE helped push traders out of the British Pound.
So, it looks like the week played out as I thought fundamentally, but unfortunately, I didn’t get the pull back to my short entry levels as I had hoped. As we can see on the 60m chart above, Cable moved lower without looking back and eventually hit my profit target level of 1.5700 before finding a bottom.
With the weekend coming quickly, it looks like I’m not going to get the price action I had hope for before the market closes, so I have decided to close my open orders to short Cable at 1.5870. No trade.
Man, that’s the fourth trade idea in a row where I got the direction right, but my conservative side kept me from getting in the trade. In one sense, it’s frustrating to miss out on profits, but in another it’s still the right thing to do FOR ME. I’ve come to realize these markets aren’t making much sense and that sentiment literally changes every hour. So, there is a big risk that a trade idea can be invalidated fundamentally almost at any time, which is why I’m being extra careful with my entries and exits.
Overall, I think the best way to trade the current environment and upcoming holiday season is to probably scale into trades rather that picking absolute entry levels. It looks like volatility is slowing down but directional movement still pops up here and there. This makes the most sense to me at the moment and hopefully it works out into winning trades.
Trade Idea: 2011-11-15 10:56 ET
Good morning forex friends! It looks like the choppy trading in Cable over the past few weeks may have been broken with today’s price action. With a strong support area being broken, does this mean more downside for GBP/USD?
Now that we’re past European bailout votes & leadership changes, it looks like we MAY be past the topsy-turvy, minute-by-minute news driven environment that has chopped up the markets over the past few weeks. Risk has been “off” since the start of the week, and it may continue today as it looks like traders are focused on weak sentiment out of Europe (German ZEW -55.2 vs -48.3 in Oct) and increasing European bond yields. This rising yield is a signal the market is losing faith in European sovereign debt faster than they can oust Occupy Wallstreet protesters!
We also got slightly lower inflation data out of the UK today and positive retail sales data from the US. Put all of this together, and I think further moves down for Cable is the path of least resistance.
Technically, we can see the market breaking below a very strong support area that has held for the past three weeks. I’m not most comfortable playing breakout plays like this, in case it’s a fake out, so I’ll wait for a pull back to the broken support area (and last week’s low) to jump in short. My stop will be one quarter of the weekly ATR, and I will target the bottom of the next consolidation area we saw in mid-October, between 1.5650 – 1.5800. Here’s what I am going to do:
Short GBP/USD at 1.5870. stop at 1.5950, pt at 1.5700
This swing setup gives me a potential return-on-risk of 2:1, potentially more if I scale into a winning position.
As always, if the market environment shifts on a new catalyst, I’ll be sure to adjust my position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!