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Closed Open Orders: 2010-01-26 21:29

PoD Chart

Shucks, the price didn’t even come close to my entry point as the risk aversion wave that hit the markets yesterday was just way too powerful. Apparently, China wants some of its banks to increase their reserve ratio because it fears an asset-bubble burst similar to the one experienced in the US. Also, one ECB committee member went out with a statement yesterday that euro’s price level is appropriate for its current fundamental standing. Hah. It should be much, much lower if you ask me… Then again, I’m just a lowly retail trader.

Also, I just realized that I made a mistake with drawing up my divergence. It’s only a valid divergence if I connect significant highs of the stochastics and major highs in price! Instead of doing that, I merely picked out a high to force the divergence… Eeps.

Anyhow, this missed trade kinda depresses me because I was really confident about that trade idea. Ah, well, I can’t get them all, right? I guess it’s time to look for opportunities elsewhere… I’ll just have to wait and see.

Trade Idea: 2010-01-26 22:01

PoD Chart

Looking at the chart above, I’m just waiting for a pullback on the pair before I jump back in on a short trade on the EURUSD pair. It just seems to me that the euro is just so weak right now, so I’m just going to jump on the bandwagon and go along for the ride!

What I’m thinking is that economic reports from the Euro zone today could push the EUR up to my desired entry point.. The German Ifo business climate report could show that business conditions improved in January, with the index estimated to climb from 94.7 to 95.2. Euro zone’s current account, which is also due today, could print a smaller deficit of €3.1 billion in December, indicating that trade activity is picking up pace.

However, as I said, overall sentiment for the euro zone is still generally bearish since Greece’s debt problems continue to threaten the financial stability of the region. Later this week, euro zone will report its consumer confidence reading for December. Although the index has been steadily improving in the past eight months, it remains in the negative territory, implying that consumers are still pessimistic with the euro zone economy.

On the technical side, I’m looking to go short once the pair hits the previous month’s low. I suspect the pair could swing lower, given the hidden bearish divergence and the way the 38.2% Fibonacci retracement level coincides with the former lows. The current trend is definitely downwards and a short seems to be the high probability trade for now…

I will set my first target at last week’s low. Also, in case the pair manages to pierce through last week’s low, I’ve also set another profit target at the 1.3850. As for my stop, I will place it just a couple of pips above the 61.8% Fibonacci level to give my trade enough room to breath. This will give me a very yummy risk-reward ratio.

Short EURUSD 1.4240, stop at 1.4400, pt1 at 1.4030, pt2 at 1.3850,

I’ll be risking 1% of my account on this trade – hopefully it turns out to be a winner like a James Cameron film!

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