Trade Idea: 2013-01-24 02:01
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?