Looking for a Day Trade in Cable – No Trade

No Trade: 2011-12-14 17:40 ET

Good afternoon! It looks like Cable’s behavioral tendencies that I mentioned yesterday played out like clockwork. Unfortunately, the market didn’t pop high enough after the UK data to trigger my shorts. Grrrrrr! Check out Cable’s price action today…

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

PCDPOD20111213.review.png

The 15 minute GBP/USD chart above says it all. Cable actually popped higher soon after the European open, and another jump came after the better-than-expected UK claimant count numbers (3k vs. 13.7k forecast). But just as we’ve seen many times before, it was an opportunity for traders to fade the pair and jump back into the current trend lower on “risk-off” sentiment.

Unfortunately for my trade idea, sellers began jumping in around the 38% Fib level rather than the 50% where I had my orders. They managed to hold and eventually pushed the pair down about 120 pips to my projected profit target at 1.5410. Doh!

With the Wednesday US session ending, and the market already playing out as I had hoped, I have decided to close my open orders to short GBP/USD at 1.5540. No Trade.

So, my entry issues continues as my single entry level technique kept me out of a high probability setup. I think with the approaching holidays bringing about lighter volume, and the continued risk of European news to bring about quick moves and direction changes, I’m just way too conservative with my entries. Gotta work on that.

For now, there hasn’t been a change in my sentiment bias, so I’ll continue to look for a USD long play this week. I’ll still be looking at Cable for an opportunity, especially with UK Retail Sales in today’s session, and EUR/USD still looks interesting with eurozone PMI in Thursday’s session. Stay tuned by following me on Twitter and Facebook!

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Trade Idea: 2011-12-13 18:27 ET

Good evening forex friends! It looks like “risk-off” is back on this week after traders processed the outcome of the EU summit. Without any real fixes, fears of sovereign debt issues and global de-leveraging continues to boost the Greenback higher. Will it continue in this session?

PCDPOD20111213.png

As I mentioned at the top, traders weren’t too keen on taking on risk after the EU summit details showed that there are still no real solutions to the huge European sovereign debt. So, with the only other possible solution, the ECB turning on the printing presses, still no where in sight, it’s still in fashion to move money to the “safe haven” of US assets.

To me it looks like this sentiment will hold for today’s session, so I look to short Cable, of course if it gives me a slightly better price than market. Will the market give it to me today? Possibly.

Today, we have the monthly release of the UK Claimant Counts (i.e. unemployment claims). This tends to be a market mover, and in the past if we don’t see a higher level macro economic event, the pair tends to pop higher and then faded. Will it happen again this time? Who knows really, but given that the Greenback is currently in favor in this environment, the higher probability reaction is that a pop higher could be faded. So, I’ll look to short. Also, volatility may still be high as the markets thin out as we march into the holiday season.

On the 15 minute chart above, I’ve highlighted a potential resistance area if tested. We can see that the 1.5540 – 1.5560 area is a broken support (on Monday) turned resistance (on Tuesday) area. I also used the Fibonacci retracement tool, and I also saw that the 61% Fib level lines up with last week’s low. Since there’s a lot lining up, I’ll look to go short there. My stop will be half of the daily ATR and my target will be the bottom of today’s average volatility range. Here’s what I’m going to do:

Short GBP/USD at 1.5540, stop at 1.5610, profit target at 1.5410

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

This trade structure gives me a potential return-on-risk of about 1.85:1, and since this is a day trade, I’m reducing my risk to 0.50% of my account.

As always, if the market environment shifts on a new catalyst, I’ll be sure to adjust my open orders or open position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!

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