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?
