EUR/CHF: Waiting for the Neck to Break
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  1. #1
    Cyclopip Guest

    Default EUR/CHF: Waiting for the Neck to Break

    Trade Idea: 2013-01-24 02:01

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    I know I can't be the only one who spotted this setup!

    Buyers have been loading up on Swiss francs like it's going out of style, and in doing so, they've managed to form two tops!

    I think it's only a matter of time before this pair takes a nosedive. Why? Well, double tops usually precede strong bearish moves, and I think the fact that the "second top" is lower than the first suggests that EUR/CHF doesn't have enough steam to rise any higher.

    Besides, the euro's rally has been an absolute monster on the charts against its other counterparts (USD, JPY, GBP), and I feel that it's due to retrace soon. I mean, c'mon, look how extended those moves are! When the time comes for the euro to head down the charts against these pairs, there's a chance that the drop could be magnified against the Swissy. It might just serve as a catalyst for a break of the double top neckline.

    So what I plan to do now is to wait for this pair to break and close below 1.2340, but I'm not gonna short it on the breakout, no sir! I'm gonna wait for it to retest the neckline as resistance because doing so will give me a better reward-to-risk ratio. Plus, I find that it's not uncommon for price to retest a level after it has been broken.

    So that's my game plan for this week. It might take a while before the setup materializes, but I think it offers a setup that's worth waiting for. Remember, patience pays!

    What do you guys think? Does anyone else plan on trading this pair? Do you think support at 1.2340 will hold?

  2. #2
    Cyclopip Guest
    Trade Idea: 2013-02-05 02:40

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    That's why it pays to wait for the break and pullback! If I had set my orders just below the support level, I would have gotten triggered last week but I would have also gotten burned!

    EUR/CHF only finally broke and closed below the support level at 1.2340 yesterday, as the euro experienced a sharp sell-off across the board.

    Apparently, concerns about Spanish Prime Minister Rajoy's potential resignation have rocked the euro. Rajoy is currently being hit with allegations of corruption, which of course doesn't bode well for stability in the region. Coupling this with the upcoming Italian elections, its no wonder that the euro bulls are taking a break.

    So for now, I'm going to wait for a retest of the former neckline. I threw up a Fibonacci and what do you know, the 50.0% Fib lines up nicely with the 1.2340 former support area!

    Hopefully we see a small pullback and so I can sell this sucker at a nice reward-to-risk ratio!

  3. #3
    Cyclopip Guest

    Default Sold at market!

    Trade Idea: 2013-02-06 02:40

    Things are going according to plan so far, I just hope that the final leg of my trading plan works out too!

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    Thanks to some better-than-expected reports from the euro zone and an overall risk-supportive environment, EUR/CHF managed to rise high enough to give me a decent entry.

    Just as I had predicted, price climbed back up to test the neckline at 1.2340 near the 50% Fib level yesterday, and boy did this level hold like a boss. I didn't hesitate to sell at market after I received confirmation from some spinning tops and a bearish divergence. Here's how I set it all up:

    Sold at market (1.2308), stop loss at 1.2420, profit target at 1.2180.

    I set my stop loss just above the recent swing high, which I think should give this trade more than enough leeway, especially since it's above the 1.2340 neckline. As for my profit target, I placed it right around September 2012's highs, which is the nearest area of interest to the south.

    I know this trade doesn't exactly have the best reward-to-risk setup (just a little over 1:1), but I think it's worth a shot. I feel like the euro could come under intense selling pressure in the coming days, what with political issues popping up in Spain and Italy. Besides, I personally think it'll be hard for the ECB to top its unexpectedly upbeat rate statement last month when it makes its announcement again tomorrow.

    In any case, I'm keeping my risk in check by putting just 0.5% of my account on the line. So even if this trade doesn't work out, my account won't take a big blow.

    What do you guys think? Will EUR/CHF keep falling?

  4. #4
    mac0904 is offline Newbie
    Join Date
    Jan 2013
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    24
    i started scaling in today at 1.2340 going short and added to my position until i'm fully in at an average of 1.2322657

    my plan is to scale out on its way down at the bigger resistance points around 1.2280 and 1.2250 and leave about 1/4 of my position in play to see if it can hit 1.22 flat.Name:  2013-02-06-TOS_CHARTS.jpg
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    Last edited by mac0904; 02-06-2013 at 04:21 PM. Reason: adding chart

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