[I]Cross posted on my blog, Currency Cross-Eyed[/I]
I’ll be honest with y’all. This is a technical play more than anything. I mean, come on, this trade has a checklist of reasons to go long! Have a look:
Rising channel? Check!
Spinning tops? Check!
Support at the 50% Fibonacci retracement level? Check!
Bullish divergence and oversold Stochastic? Chickity check!
Now, I know that the euro came under a bit of selling pressure yesterday on renewed concerns about the debt crisis, and I’m fully aware that the pound has been rallying as of late… but with a technical setup like this staring me in the face, I just couldn’t resist buying this pair at market!
Hear me out, fellas. I think the potential rewards that this trade could give me are worth the risk! The way I see it, I only need to place my stop below the rising trend line and the bottom WATR, while the upside potential for this trade seems very high!
If support at the trend line holds, I think it’s likely that the pair will retest the previous high. It’s also possible that the pair will rise to new heights and touch .8000.
Here’s how I set this baby up:
Bought EUR/GBP at market (.7895), stop loss at .7865, first profit target at .7950, second profit target at .8000.
Basically, I’ll be looking to exit at the previous high and at the top of the rising channel. I’m putting just 0.50% of my account on the line, since I understand that there is quite a bit of risk involved here.
If all goes well and both of my profit targets get hit, I should be able to bag an average of 80 pips, which translates to a return on risk of about 2.67:1 given my stop of 30 pips.
Now, don’t y’all think that’s worth the risk?