[B]My picks:[/B] Pending GBPCHF Breakout
[B]Expertise:[/B] Combining Money Management with Fundamental and Technical Analysis
[B]Average Time Frame of Trades:[/B] 3 days - 1 week
Over the past few months, the troubles I have had in daily setups have come from an over abundance of volatility and momentum. However, my setup from last Monday was plagued by the exact opposite scenario. Starting out the weak, I had to account not only for the Australian-based event risk (including the RBA rate decision and GDP numbers) but also an influential glut of data and events for the rest of the industrialized world as well. With so much inherent risk through this build up, risk trends would be drowned and the broader market turned to chop. For my AUDCHF position, the promising breakout that signaled an entry would suffer from the stalled momentum behind risk appetite. Considering the daily close that signaled my entry (which was part of my design on a move above a triple top) and stop, the ensuing rally would be stalled 15 points from my first target and subsequently reverse to stop me out.
This week, I am fully aware of the congestion that can anchor the market to ill-defined channels. However, we could just as easily find a renewed interest in risk appetite that revives trends (whether they be bullish or bearish). Therefore, I will approach GBPCHF with patience. There is potential for range trades here; but a breakout would offer the better and more definable trade. Looking for a fundamental catalyst outside the vague realm of risk appetite, there are few indicators on the British and Swiss economic calendars that can move the market on their own. Therefore, it will be a constant vigilance of market sentiment when qualifying this pair. Just as fundamentals can push price action in either direction; technicals layout scenarios for a break in either direction. Since the reversal at the end of 2008, this pair has maintained a gentle, bullish bias. This would support an eventual push above recent highs set last month, but a 200-day SMA and a moderate 38.2% Fib retracement (at 1.7575 and 1.7690 respectively). On the other hand, price action over the past month has developed what looks like a clear head-and-shoulders pattern with the lower high that is the right shoulder having to stall at or below 1.75 to complete its structure. From here, a trend will have to be forcibly developed; and there is no clear guidance on which way price action ‘should’ go. Therefore, I will wait for either a close above 1.7650 (what would be the highest close since early December) or below 1.7125 (the neckline in the head-and-shoulders formation) as a trigger for entry. The time frame of the close (whether it be daily, 240-minutes, hourly) I will qualify on momentum at the time. As for the particulars of the position (stops, targets, adjustment levels) will depend on my entry and the developments between now and then.