Analys från DailyFX

A "Textbook" GBP/CAD Pattern with a Hidden Twist

Published

11 år ago

29 oktober, 2013

DailyFX

Talking Points:

The Strong Case for Shorting GBP/CAD
Hidden Factors That Could Jeopardize the Trade
Important Safeguards for GBP/CAD Short Sellers

There is a lot to be said for the topping tail candlestick on GBPCAD daily chart. For many, this would be a textbook trading pattern, and admittedly, there is a strong case for going short below the low of this bar for many different types of traders:

Pattern traders will note that price is near the top of a rising channel or wedge pattern and has nearly touched it
Depending on the indicator used, there is a high probability that a move down would create a reversal divergence pattern
Many Elliott Wave traders would agree that there is a good possibility of price being at the end of a wave 5
The run up with the sudden topping tail candlestick is a beloved trade signal for candlestick traders

Guest Commentary: The Strong Case for Shorting GBP/CAD

The textbook entry would be to place a short order below the low of the topping tail for a day or two, entering into a price-reversal scenario. But, this is not necessarily a “textbook” short set-up.

Guest Commentary: The Surprising Case Against Shorting GBPCAD

It’s possible that the short scenario would work, but beyond first glance, there are also a number of factors that make this otherwise strong trade seem suspect:

There are two possible channel resistance lines forming a zone. It is entirely possible that in order to complete a true reversal, price will want to test both levels, not just the current one
More importantly, price is currently stuck between the 61.8% and 100% Fibonacci expansion levels (1.6840 and 1.7086, respectively), shown below. Experience suggests that a trade of this type that does not occur at one of these levels has a higher probability of being stopped out
There is a rising inner trend line with a steep slope that is rushing up to meet price. Any price drop will have to contend with that before turning around

As always, the mix of factors will confuse traders, and there is no crystal ball that foretells the markets. Nonetheless, the four-hour chart provides even more clues.

Here, there is an even steeper rising line of support. Even though price has completed a bearish engulfing candlestick pattern, it has (so far) not shown any signs of following through.

Guest Commentary: A Crucial Four-Hour Trend Line in GBP/CAD

To Short GBP/CAD or Not to Short

On the weight of the evidence, the short opportunity on the daily chart cannot be denied. However, two safeguards may be considered by traders who ultimately decide to play the short side:

First, take the trade on half risk. In case this turns out to be a losing trade, there will be some back-up capital for another try, as the general picture strongly suggests that at least a temporary bearish situation is forming
Watch the four-hour chart like a hawk to gauge the reaction on the steep rising trend line. Reduce exposure quickly if price hesitates, moving the overall situation to breakeven. This way, if the trade turns profitable, there will at least be a chance of riding it. If, however, the trade does not trigger and price just shoots higher or does not go far enough down before turning up again, then a second try on the daily chart would then have a higher probability of working

Either way, the moral of the story is to be prepared to take at least two shots at this move—if not three—so plan risk accordingly.

By Kaye Lee, private fund trader and head trader consultant, StraightTalkTrading.com

Analys från DailyFX

EURUSD Weekly Technical Analysis: New Month, More Weakness

Published

7 år ago

30 september, 2017

DailyFX

What’s inside:

EURUSD broke the ‘neckline’ of a bearish ‘head-and-shoulders’ pattern, April trend-line
Resistance in vicinity of 11825/80 likely to keep a lid on further strength
Targeting the low to mid-11600s with more selling

Confidence is essential to successful trading, see this new guide – ’Building Confidence in Trading’.

Coming into last week we pointed out the likelihood of finally seeing a resolution of the range EURUSD had been stuck in for the past few weeks, and one of the outcomes we made note of as a possibility was for the triggering of a ’head-and-shoulders’ pattern. Indeed, we saw a break of the ’neckline’ along with a drop below the April trend-line. This led to decent selling before a minor bounce took shape during the latter part of last week.

Looking ahead to next week the euro is set up for further losses as the path of least resistance has turned lower. Looking to a capper on any further strength there is resistance in the 11825-11880 area (old support becomes new resistance). As long as the euro stays below this area a downward bias will remain firmly intact.

Looking lower towards support eyes will be on the August low at 11662 and the 2016 high of 11616, of which the latter just happens to align almost precisely with the measured move target of the ‘head-and-shoulders’ pattern (determined by subtracting the height of the pattern from the neckline).

Bottom line: Shorts look set to have the upperhand as a fresh month gets underway as long as the euro remains capped by resistance. On weakness, we’ll be watching how the euro responds to a drop into support levels.

For a longer-term outlook on EURUSD, check out the just released Q4 Forecast.

EURUSD: Daily

—Written by Paul Robinson, Market Analyst

You can receive Paul’s analysis directly via email bysigning up here.

You can follow Paul on Twitter at@PaulRobinonFX.

Analys från DailyFX

Euro Bias Mixed Heading into October, Q4’17

Published

7 år ago

29 september, 2017

DailyFX

Euro Bias Mixed Heading into October, Q4'17

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

EURUSD: Retail trader data shows 37.3% of traders are net-long with the ratio of traders short to long at 1.68 to 1. In fact, traders have remained net-short since Apr 18 when EURUSD traded near 1.07831; price has moved 9.6% higher since then. The number of traders net-long is 15.4% lower than yesterday and 16.4% higher from last week, while the number of traders net-short is 0.4% higher than yesterday and 10.5% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EURUSD prices may continue to rise. Positioning is more net-short than yesterday but less net-short from last week. The combination of current sentiment and recent changes gives us a further mixed EURUSD trading bias.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

Analys från DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

Published

7 år ago

29 september, 2017

DailyFX

British Pound Reversal Potential Persists Heading into New Quarter

Why and how do we use IG Client Sentiment in trading? See our guide and real-time data.

GBPUSD: Retail trader data shows 38.2% of traders are net-long with the ratio of traders short to long at 1.62 to 1. In fact, traders have remained net-short since Sep 05 when GBPUSD traded near 1.29615; price has moved 3.4% higher since then. The number of traders net-long is 0.1% higher than yesterday and 13.4% higher from last week, while the number of traders net-short is 10.6% lower than yesterday and 18.3% lower from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests GBPUSD prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current GBPUSD price trend may soon reverse lower despite the fact traders remain net-short.

— Written by Christopher Vecchio, CFA, Senior Currency Strategist

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form