NZD/USD: Eyes on the Trend Line – Missed It Again!

Trade Canceled: 2012-05-18 1:50

Ugh, I can’t believe I missed this setup! Yesterday we talked about how NZD/USD might suffer more losses. Unfortunately, the pair didn’t rise enough to hit my entry order.

NZD/USD remained on a tight 50-pip range for most of the day yesterday despite the relatively sharper losses that occurred in European currencies. It found resistance at the .7680 area, which is a few pips below my .7700 short order.

NZD/USD Trade Canceled

Then, just when I was thinking of shorting at a retest of the range‘s resistance, the pair went on its merry way down a couple of hours ago as overall risk aversion was fueled by successive downgrades, mixed U.S. data, and weak Chinese data. NZD/USD broke below its .7630 support and is currently trading around the .7550 area.

Where have I gone wrong on this trade? Was I too picky with my entry point? A couple of my trader friends have pointed out that I could’ve also jumped in the bear party and just placed my stop above the range.

What do you think? How could I have played this trade better? As always, your thoughts are most welcome!

Trade Idea: 2012-05-17 2:17

My, my! It looks like the trends are really strong these days! Since I’m thinking the trend will still be my friend, I’m looking at this potential short on NZD/USD.

There’s a falling trend line on NZD/USD’s 1-hour chart that extends all the way back to the last week of April so I’m hoping to catch the retest of this resistance level. I used my handy-dandy Fibonacci retracement tool to figure out where I should enter, and I noticed that the .7700 major psychological handle is close to the 38.2% and 50% levels.

NZD/USD trend line

However, I did note that Stochastic is still pointing upwards, which means that Kiwi bulls could push this pair further up. Don’t worry, I’ll be waiting for this oscillator to reach the overbought zone and turn down before entering this trade. Once in this trade, I’ll set my stop just above this week’s top WATR and my target at the recent low of .7625.

As for fundamentals and risk sentiment, I do believe that the downbeat outlook for the markets could carry on, at least for the next couple of days. Although Greece already announced that they’d be having their elections next week, market participants seem to be pricing in the possibility of a Grexit later on.

Here’s what I’m planning to do:

Short NZD/USD at .7700, stop loss at .7775, PT at .7625.

I’ll be risking 0.5% of my account on this short-term trade and, if you’re thinking of joining me, make sure you read our risk disclosure first.

I’d love to hear what you think of this setup so don’t be shy to share your thoughts!

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Good luck in your trades this week, buddies!

Happy time

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  • Digitalgypsy

    I’m also waiting for a pullback to .7700 to get short 🙂

    • happypip

      Yipes. Looks like we missed it. Did you jump in at market or short at the breakdown by any chance? That drop was really strong!

  • Luciano

    Would it be OK, to go long until it reaches the point near the 0.382 Fib.?

    • happypip

      My apologies for my late response! It looks like that wasn’t such a good idea in retrospect though. But I do know some traders who do that before jumping in short, and that could probably work for a quick scalp trade. 

  • Jj_likes_4ndz

    Hi HappyPip what do u think about my analysis?… 

    • happypip

      Pretty interesting! I replied to your thread and hopefully other forum members share their two cents, too 🙂

  • Anto.gj

    I had drawn the trendline from the tops of 05/11 and 05/15… So I set the order at .7660 instead of .7700. made 87 pips :>

    • happypip

      Well, trend lines can be a bit subjective and it’s a matter of which highs you choose to connect. I’m happy you were able to pick the right trend line and grab some pips off a short Kiwi trade. Keep it up!

  • alwjmonster

    nope, happypip i think you have nothing to correct about, being picky for an entry is very good, we don just jump in a trade without planning good entry point, being picky because you think the stochastic haven reach overbought zone, you’re not really picky to me, but a little lacks of luck.. 

    • happypip

      Haha, that’s a nice way to put it! Yep, I believe my trade idea was valid and I was pinpointing the optimal area to short. It just happened that the downtrend was way too strong for that retracement I was hoping for. Thanks for checking out my blog!

  • Jj_likes_4ndz

    NZD/USD touched the pivotal resistance two times yesterday so that was the best point to go short.Yesterday when i came to read your trade step i was little bit confused about my short NZD but Thank God everything went good.

    • happypip

      Oh I’m so sorry about leaving you a bit confused. How did your trade go?

  • do do

    My two yuan — you can see there was supply at .7680 level because price hit it from the downside with 30-50 pip rejection a few times. Since the overall pic is short, would have been a good small SL trade to take

    • happypip

      Yep, in retrospect, that did look like the ideal entry area. I’ll be more watchful next time. Thanks for the tip!

  • Albert Nel

    No way were you wrong in not taking optimal trade entry. We are traders, not long-term investors that can just jump in randomly and let the weeks, months and years start going in our favor. Because of swing trading, optimal trade entry is super important. You still took a winning trade because no trade = no money lost! 🙂

    • happypip

      Aww, thanks! I really appreciate those kind words. Onto the next trade setup! 🙂