Rising Wedge Break in EUR/USD? – Trade Closed

Trade Closed: 2011-05-22 10:38 ET

After a couple of missed trades, I finally caught a break on Friday as European debt issues returned to the spot light and pushed the euro down before trading closed for the weekend. With the pair now testing strong support, I’ve decided to close my trade out.

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

PCDPOD20110519.review.png

Along with the sovereign debt concerns, weakness was also sparked as Spain’s socialist party was defeated and as S&P said it my cut Italy’s credit rating (to read more on Friday’s events, please visit the EUR section of FreshPips.com). As a result, EUR/USD went from nearly hitting 1.4350 to closing the week just above 1.4150.

As we can see in the chart above, the rising wedge was finally broken, triggering my short orders at 1.4200 in the process. At the open of this new trading week, we saw a gap lower, triggering my second short order in the process before trading below 1.4100 in this early Asia trading session.

With the pair testing a potentially strong support area, and with stochastics indicating oversold conditions, I’ve decided to close the trade out manually by closing at market (1.4086).

1st Position: +114 pips
2nd Position: +34 pips
Total: +1.85% gain

So, it looks like I finally avoided another missed trade by sheer luck, but luck favors those who are prepared right? Overall, I think I executed this trade well, but I could have done better by adjusting to price action by shorting sooner when the wedge was broken–maybe around 1.4250.

This week, I’ll continue to look for new euro short opportunities (check out Big Pippin’s blog for new chart ideas), possibly on a retracement if we see support, or if it breaks that support area. Of course, if I do plan on taking a new trade, I’ll post it up on my Twitter and Facebook pages. Stay tuned and good luck this week!

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Trade Idea: 2011-05-19 4:04 ET

Good morning folks! It looks like there might be one more trade to end the week with a winner as I spot a bearish signal or two EUR/USD. Check it out!

PCDPOD20110519.png

On the one hour chart above, we can see two patterns indicating of a new swing lower in EUR/USD: bearish divergence and a rising wedge formation. Pretty straight forward chart patterns, and given that they are forming in a downtrend and at the top of the weekly average true range, there’s a good possibility of the market moving lower rather than higher.

On the forex calendar, we do have a few second tier events (Philly Fed, US existing home sales & initial claims, German PPI, etc.) that could bring some volatility to the market through the end of this week. With US data disappointing earlier in the week, we may see a bit of the same risk aversion going into the weekend.

So, I’ll look to short with a complete break of that bottom rising trendline, my stop will be half of the average daily true range and my target will be around this week’s low at 1.4040.

Short EUR/USD at 1.4200, stop at 1.4280, pt at 1.4040.
I will scale another position and trail my stop every 80 pips.

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

This trade structure gives me a potential return of 3:1 on my risk. Let’s see how this bad boy goes! Thanks for checking out my blog and be sure to stay tuned to updates and adjustments through my Twitter and Facebook pages…good luck and good trading!

5 comments

  1. CurrencyWaves

    Careful with that rising wedge!!  Looks to me to be a leading diagonal and should be a pullback to  1.4120 area before moving higher to the 1.4600 area

    Reply
  2. Pipcrawlerpipcrawler Post author

    Thanks for the comments and thanks to @62b7e39e79762bf0241b13dbb88c750a:disqus for that info in a leading diagonal!

    Reply

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