Potential Resistance Play Setup on Cable?–Trade Closed

Trade Closed: 2011-03-03 21:00

PCDPOD20110303.png

My short orders at 1.6325 were triggered and I got the resistance I was looking for in that area. The following move lower was enough to trigger my second short position at 1.6275, where the pair consolidated around the PWH.

The mother of all US economic reports, US Non-Farm Payrolls, is on tap to close out the trading week, and with surprise positive reads from other recent US employment data points (+217K vs. +180K forecast from ADP and 368K vs. 395K initial claims) it looks like NFP will most likely be a positive surprise as well and possibly spark risk tolerance behaviors(ie. a flow out of USD into other currencies).

I decided to close out my position due to the high probability of a move higher for Cable by closing out both positions manually at 1.6278.

1st Position: +47 pips
2nd Position: -3 pips
Total: +0.88% gain

Overall a good trade and I don’t think there was anything I could have done differently. I definitely could have taken a long position at the 38% Fib retracement (around 1.6220) of the recent swing higher, but I felt the rally was a bit tired after such a strong move.

Thanks for checking out my blog, and stay tuned next week for new ideas and price action reviews. For those looking to trade the NFP Report, be sure to check out Forexgump’s report first! Have a great weekend everyone!

Trade Idea: 2011-03-01 20:10

Good evening! It’s been a hot minute since I’ve posted as Forexgump called me away back to Piptropolis for an emergency…he didn’t know how to set up his DVR to record the Oscars! WTH! So, I’m back with a day trade idea to play upcoming UK data.

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

PCDPOD20110302.png

As we can see on the chart above, Cable was limited to a tight range yesterday as it ran into strong resistance round 1.6325 and strong support around 1.6250. These areas should be closely watched again as we do have potentially volatile data set to be released from the UK.

After taking a look at the Forex calendar, UK construction PMI is on tap for release at 9:30 am GMT, and in the past it seems like it does have the ability to spark strong moves. This month, the data is expected to come in weaker-than-expected, and even if it surprises with a better read, I think any upside movement will be limited as the broad US Dollar selloff seems a bit overdone in the short-term. So, in either scenario, I think the Greenback can make a short-term run on.

So, I’m looking at going short in the area marked on the chart between the top DATR and previous day high (1.6317 – 1.6329). If the market runs up there, I think there will be traders interested in taking on some short positions. Since I’m looking at holding this as a day trade, my stop will be a tight 50 pips (about half of the daily average true range), and I’ll target just above the area around the bottom DATR (1.6193) and major psych level 1.6200. Finally, I’ll trail my stop and scale into my position every 50 pips.

Shorting GBP/USD at 1.6325. Stop/trail/adding full positions every 50 pips. Target 1.6200

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

If the market goes my way, the potential R:R on this setup is 4.5:1–not bad! So, let’s see if UK Construction PMI can me the volatility I’m looking for and if Cable bulls have run out steam.

Stay tuned for updates and adjustments, and thanks for checking out my blog. Sign up above for our Twitter, Facebook, my email updates to be notified of my “Pick of the Day” right away, or check out my Twitter page as I like to call out levels to watch during the Euro/US session overlap! Good luck and good trading!

  • samk090905

    your idea was so late. you mentioned short at 1.6325 but g/u is currently at 1.6250. dont you normally post an idea before you do it?

    thank you,

  • Pipcrawler

    Hey sam, not sure if you read the actual post, but this trade idea is to play the potential volatility of the upcoming UK Construction PMI data. IF the market moves higher to retest yesterday’s resistance area, then I’ll take a short position…if it doesn’t then no biggie, I’ll keep an eye out for a new opportunity… Good luck to you and thanks for checking out my blog!

  • samk090905

    your idea was so late. you mentioned short at 1.6325 but g/u is currently at 1.6250. dont you normally post an idea before you do it?

    thank you,

  • Pipcrawler

    Hey sam, not sure if you read the actual post, but this trade idea is to play the potential volatility of the upcoming UK Construction PMI data. IF the market moves higher to retest yesterday’s resistance area, then I’ll take a short position…if it doesn’t then no biggie, I’ll keep an eye out for a new opportunity… Good luck to you and thanks for checking out my blog!

  • wolfpup77

    You’re right on the money here Sir; it seems as if a triple top has formed on the hourly chart and I am shorting @ 1.6325 along with you.

  • wolfpup77

    You’re right on the money here Sir; it seems as if a triple top has formed on the hourly chart and I am shorting @ 1.6325 along with you.

  • Pipcrawler

    Thanks wolfpup77! Yeah, I get lucky every once in a while ;p I hope this trade worked out well for you!

  • Pipcrawler

    Thanks wolfpup77! Yeah, I get lucky every once in a while ;p I hope this trade worked out well for you!

  • PurplePipEater

    Do you use a different Stochastics setting for the 15m chart? On other long term charts I’ve noticed you have the settings 14,3,3.
    Thanks!

  • PurplePipEater

    Do you use a different Stochastics setting for the 15m chart? On other long term charts I’ve noticed you have the settings 14,3,3.
    Thanks!

  • Pipcrawler

    Hey purplepipeater! I use 14,3,3 for stochs regardless of the timeframe. I hope this helps and thanks for checking out my blog!

  • Pipcrawler

    Hey purplepipeater! I use 14,3,3 for stochs regardless of the timeframe. I hope this helps and thanks for checking out my blog!