Shorting EUR/GBP at Previous Resistance

Trade Idea: 2012-12-04 22:55

As it turns out, I was correct in my hunch that EUR/GBP would break through the previous week’s high. Now that the pair is about to test the .8150 MiPs, I think we could see the recent uptrend come to an end soon.

Not only does this line up with the top WATR, but it also happens to have served as a major resistance level in the past. If you scroll your charts back, or zoom out to a longer time frame, you’ll see that EUR/GBP found resistance at around .8150 on June 11 and on October 22, earlier this year. Furthermore, Stochastic is overbought on the 1-hour, 4-hour, and daily time frames, which could indicate that buyers are running out of steam.

On the fundamental front, I think the euphoria of Greece getting German approval could die down soon, and sooner or later, the market will realize that there’s still a ton of problems that need to be solved.

That said, I decided to jump in and short at market!

Short EUR/GBP at .8136, stop at .8190, take profit at .8000

Since this is a countertrend trade, I’ll be risking just 0.75% of my account. One other reason why I like this setup is because it provides me with a sweet reward-to-risk ratio.

There is some event risk in the form of the BOE and ECB rate statements tomorrow, but I don’t think we’ll hear anything we haven’t heard before. Therefore, those two events shouldn’t cause too much volatility in the markets.

Are you guys gonna join me on this trade? Or do you think the uptrend will continue?

Trade Update: 2012-12-12 02:47

Just when I thought I was gonna be a Grinch this holiday season, this trade comes along and brightens up my month. Ever since I sold this pair, it’s been an absolute angel! Booyeah!

Not long after I solid this sucker, risk aversion crept back into the markets and dragged the euro down. Blame it on the euro zone’s ugly retail sales data, weak bond auctions, and growth forecast downgrade!

Obviously, this was exactly what EUR/GBP sellers needed to push the pair lower, and they did so aggressively. With the weekend approaching, I wanted to give my trade more room to drop, but at the same time, I didn’t want to risk losing dough so I did what any sensible trader would do - I moved my stop to break even.

Yep, this trade is already risk-free, baby! But right now, it seems that sellers have run out of steam, as the pair has retraced quite a bit. Hopefully, they’ll come pouring back in in full force soon, so I can hit my profit target before the week comes to an end.

That’s all for now, fellas. I’ll be sure to keep you guys posted with any new updates or trade ideas I may have. Feel free to send trade suggestions my way by filling out the comment box below. Peace out!