Entry Point: TBD – still waiting for a reversal candlestick. Ideally I would like to enter around .8620,
Stop loss: .8510– below recent lows
Profit target: .8930
Risk Percentage: 0.50%
Reward-to-risk Ratio: Roughly 2.7:1
Indicators used: RSI
The franc is really, really, really strong right now, but I do think the move may be overdone and we could see a retracement soon. I think we could see a double bottom form at .8560. RSI is also almost below 30 so we might see a reversal soon. I am just waiting for RSI to go below that level, or for a reversal candlestick to form before I go long.
Because this is a contrarian trade, I will only risk 0.5% of my account. If it shoots up, I stand to make about 1.35%, which isn’t so bad.
If the dollar manages to make a nice rally next week, I would consider holding onto this position for the long haul and see if the pair can break above resistance at .8935.
One thing you may want to watch out for is the QE3 situation. I am new to forex, but if there is no clear rejection of a possibility of QE3 in the coming week or so and rumors persist, would that not have a pretty significant effect on this pair, considering it would be bearish on the USD and cause the Swissy to rise, given its safe haven quality? Just a suggestion.