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Gartley-Validated Intraday Set-up in GBP/CAD

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Talking Points:

  • Consolidation Pattern on GBP/CAD Daily Chart
  • Favorable Risk/Reward Profile
  • Gartley Pattern Helps Validate the Trade

The usual procedure for trading trends is to wait for a legitimate pullback in an uptrend or downtrend, and there is a definite uptrend on the below daily chart of GBPCAD that is only just beginning to pull back.

Guest Commentary: Pullback in an Overall GBP/CAD Uptrend

Gartley-Validated_Intraday_Set-up_in_GBPCAD_body_GuestCommentary_KayeLee_January16A_1.png, Gartley-Validated Intraday Set-up in GBP/CAD

There are pros and cons to taking this trade when viewed from the higher time frames. The definite con is that price has largely moved sideways and hasn’t really given sufficient room for a trade, which suggests that in order to make for suitable risk/reward profile, a much lower time frame is needed.

However, this recent consolidation suggests that a battle between bulls and bears is happening on the lower time frames, and that may well provide enough of a range to justify a low-risk trade.

The four-hour chart below provides a better picture of the range, which appears to be steady and tradable. Even if price only rises to the top of the range, there are approximately 195 pips between the current price and overhead resistance.

Guest Commentary: 4-Hour Range in GBP/CAD

Gartley-Validated_Intraday_Set-up_in_GBPCAD_body_GuestCommentary_KayeLee_January16A_2.png, Gartley-Validated Intraday Set-up in GBP/CAD

On the downside, the support region is about 60 pips wide. This makes for attractive risk/reward, especially when considering that the uptrend on the higher time frames could resume as well.

The hourly chart below shows a harmonic pattern that lends credence to this trade, the Gartley pattern. (The rules for trading Gartley patterns were described in a previous article.)

See also: A Credible Gartley Pattern in EUR/GBP

Although price has come very close to touching the 78.6% retracement level, it’s important to be strict with regard to support levels. This retracement level will only become tradable once price has actually touched it. Thus, the support zone emerges as 1.7768-1.7826.

Guest Commentary: Gartley Pattern on GBP/CAD Hourly Chart

Gartley-Validated_Intraday_Set-up_in_GBPCAD_body_GuestCommentary_KayeLee_January16A_3.png, Gartley-Validated Intraday Set-up in GBP/CAD

Nonetheless, some traders may choose to be aggressive and use pin bars, bullish engulfing patterns, and/or bullish reversal divergence on the 15-minute chart as trade triggers.

As always, two or three tries may be needed to get in on this trend. The decision to wait for the support zone to be validated may result in missing this trade, but experience suggests this is unlikely.

An examination of the 61.8% level shows that it was slightly breached, and often, this also means that a breach of the 78.6% level will occur before price turns around.

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

Analys från DailyFX

EURUSD Weekly Technical Analysis: New Month, More Weakness

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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

EURUSD Weekly Technical Analysis: New Month, More Weakness

—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.

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Euro Bias Mixed Heading into October, Q4’17

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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

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British Pound Reversal Potential Persists Heading into New Quarter

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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

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