New opportunity to jump in the Cable downtrend? – Trade Closed

Trade Closed: 2010-06-11 1:10 pm EST

PoD Chart

Good afternoon! My remaining position in Cable closed at 1.4620 for a profit during yesterday’s return to positive sentiment towards global growth.

1st Half: +155 pips
2nd Half: +100 pips
Total: +0.70% gain

Not a bad gain for the week, but I definitely could have done better. First, I failed to recognize that the move lower over the past week from around 1.4740 to this week’s low around 1.4350 was about 365 pips. This is the average weekly volatility range. I should have taken off my swing trade as the pair has moved its entire range in one direction. And secondly, 1.4350 held very well as support–I definitely should have readjusted then with another stop adjustment or take the trade off completely.

One last thing I wanted to point out is the power of support and resistance. After my trade closed, Cable retested the 1.4700 – 1.4750 area and sellers once again jumped in to sell the pair after weak economic data from both the US (weak retail sales) and the UK (weak manufacturing). That area was a high probability setup for an easy short trade. Too bad I missed it!

Anyways, that’s it for the week and it’s time to take my small profit to the bank and enjoy the weekend. As we head further into the summer, I’ll look for shorter term plays as the markets usually stay choppy and rangebound during this time of year. Stay tuned and have a great weekend!

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Trade Adjustment: 2010-06-09 1:40 pm EST

Good afternoon Forex friends! It has been a good but choppy ride since I entered my trade as market direction seems to change with every news report released. Today, China’s huge positive surprise in exports and inflation brought risk tolerance back to the global markets, pushing up Cable against the Dollar.

After making a lows around 1.4350, Cable has popped higher to 1.4600 where it has found temporary resistance. Actually, this area has served as a significant area to watch as it was strong resistance back on 5/26 – 5/27, and then as strong support 6/1 – 6/2. Will it hold as resistance now? Maybe so, but in case it doesn’t, I have decided to adjust my stop to 1.4620–just above today’s high.

This locks in further profits ahead of the UK interest rate decision (Thurs, 11 am GMT) and major US data this week (Retail Sales, Fri 12:30 pm GMT). I will continue to target recent swing lows–around 1.4250–and I may close down this trade over the weekend.

Stay tuned for updates and thanks for checking out my blog! Good luck!

Trade Update: 2010-06-04 8:06 am EST

Good morning! Since I posted my trade idea, Cable did make it’s way back up to my short entry point at 1.4720 and resistance held between 1.4700 – 1.4750 before dropping to its current levels 1.4565.

With NFP minutes away, I have decided to lock in profits by closing down half of my position (1.4565) and adjusting the stop on my remaining position to 1.4670.

This adjustment has locked in profits and given my remaining position enough wiggle room to weather the upcoming volatility and hopefully let me continue to play any potential move lower.

So, nothing to do now but wait for the US jobs data. For all of you newbies, be sure to avoid whipsaw and slippage by refraining from placing trades after this news event. It’s a monster event and could be bad for your trading health! Ok?

Stay tuned for updates or adjustments, good luck, and good trading!

Trade Idea: 2010-06-01 1:47 pm EST

Good afternoon fellow Forex fanatics! I’m back after a short vacation and ready to grab some pips. It looks like Cable is giving me the best opportunity at the moment with a nice technical setup. Let’s take a look!

PoD Chart

I have the four hour chart up on GBPUSD and I can see two technical setups: bearish divergence and potential resistance at the 61% Fibonacci retracement area.

First, we can see higher “highs” in price action as Cable trends higher, and lower “highs” on stochastics forming a bearish divergence signal. This comes as the pair tests the 61% Fibonacci retracement area and psychological significant area between 1.47 and 1.48. It was an area that held as support in March, but broke down as risk aversion took hold of the markets in May. Will it now hold as resistance?

Fundamentally, the rally continued in the British Pound on bets that the $35.5 billion takeover of AIG’s main Asian unit by Prudential Plc may fail, thus waning the concern that the deal will spark an outflow of the UK currency.

Another story pushing up the Pound recently is the concern on CPI as it increased 3.7% in April. It looks like the combination of quantitative easing, an increase in the Value Added Tax (VAT), and commodities are contributing to the rise in inflation and traders are speculating a potential rate increase by the MPC. So, will the Bank of England raise rates?

I think this is a short term story as we are currently seeing commodities take a hit and as the BOE recently paused on their QE efforts. Also, there are wage growth issues and high unemployment to consider before tightening up monetary policy.

In today’s Forex calendar, the US recently came off a holiday weekend with a relatively positive report on construction spending and ISM Manufacturing. Both came in better than forecasts, giving USD bulls a reason to continue to push forward. Of course, this is just one set of data, and with Non-Farm Payrolls coming up, I don’t plan on sticking to one side of sentiment for too long. For now, I’ll stay a USD bull and act accordingly before Friday’s jobs numbers.

So, I plan on going short based mostly on my technical analysis, with a sprinkle of short-term fundamental bias in favor of the Greenback. I will wait for Cable to get back just below the 61% Fib level before jumping in. My stop will be the daily average true range of around 190 pips. I will target previous lows around 1.4250 and take profits along the way. Here’s what I am going to do:

Short GBPUSD at 1.4720, stop at 1.4910, pt1 at 1.4540, pt2 at 1.4250

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

Stay tuned as I may make quick adjustments ahead of the NFP report on Friday. Thanks for checking out my blog and good luck!

  • lasereyes

    It won’t be able to break support bellow 1.46

  • wolfpup77

    I already placed a market order to short this @ 1.4660 about five minutes before this posted. I jumped in a bit early, but I’m with you on this one; the bears will come out in full force, and the technicals and fundamentals are lining up for a downturn!

  • lasereyes

    It won’t be able to break support bellow 1.46

  • wolfpup77

    I already placed a market order to short this @ 1.4660 about five minutes before this posted. I jumped in a bit early, but I’m with you on this one; the bears will come out in full force, and the technicals and fundamentals are lining up for a downturn!

  • pipsprof.

    This market is bullish, so watch out.

  • pipsprof.

    This market is bullish, so watch out.

  • Pipcrawler

    thanks for the comments guys! I still see the bearish divergence signal is still holding as stochastics “highs” are going lower. We’ll just have to wait and see what happens, but I still think the bulls aren’t that strong, especially with some of the positive news from the UK.

    We’ll have to just wait and see, but I’ll probably close this trade down, or adjust my stops, and hopefully lock in some profits before the NFP data tomorrow. Stay tuned!

  • pipsprof.

    Better to take your profit and run now,the market has been very choppy of late.

  • Pipcrawler

    thanks for the comments guys! I still see the bearish divergence signal is still holding as stochastics “highs” are going lower. We’ll just have to wait and see what happens, but I still think the bulls aren’t that strong, especially with some of the positive news from the UK.

    We’ll have to just wait and see, but I’ll probably close this trade down, or adjust my stops, and hopefully lock in some profits before the NFP data tomorrow. Stay tuned!

  • pipsprof.

    Better to take your profit and run now,the market has been very choppy of late.

  • lasereyes

    Well, the pound fell in five waves from 1.688 to 1.422, which is now retracing in three waves, I would expect the current uptrend to break above 1.5, to around 1.52. Then the next move down would be to 1.39 by the end of july to mid august. Of course, eurusd resistance will be much stronger, this will create a divergence in the correlation which will make eurgbp short a good trade also.
    I recommend short gbpusd @ 1.52, sl @ 1.581, tp @ 1.391 for a nice long term trade, 1300 pips.

  • lasereyes

    Well, the pound fell in five waves from 1.688 to 1.422, which is now retracing in three waves, I would expect the current uptrend to break above 1.5, to around 1.52. Then the next move down would be to 1.39 by the end of july to mid august. Of course, eurusd resistance will be much stronger, this will create a divergence in the correlation which will make eurgbp short a good trade also.
    I recommend short gbpusd @ 1.52, sl @ 1.581, tp @ 1.391 for a nice long term trade, 1300 pips.