Wednesday June 19, 2013 12:00 UTC
by Steven Hatzakis
The chart shows the bullish trend in EURUSD has broken above a medium term resistance line (point 1 on chart) where it is now finding support (and resistance around 1.34) after failing to hold above the short term bullish support line (point 2 on chart). Although the momentum and trend is bullish overall there could be significant resistance along a long term descending bearish resistance line (point 3 on chart) which could cause a trend reversal unless there is a breakthrough to the upside.
Below are examples of how to trade a bullish continuation if the trend continues, or a bearish reversal and break-out to the downside if current support doesn’t hold (or if resistance holds at 1.3400).
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @1.3434 with a Limit to take profit @ 1.3490 and a stop-loss to cut losses @ 1.3380 Risk/Reward Summary: Limit risk = +56 pips profit / (-54) Stop-loss risk = Gain to Loss ratio = 1.04
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.3367, with a Limit to take profit @ 1.3318 and a stop-loss to cut losses @ 1.3411 Risk/Reward Summary: Limit risk = +49 pips profit / (-44) Stop-loss risk = Gain to Loss Ratio = 1.11
Risk Disclosure: All forex trading ideas are the opinion of the author, are only for demonstrative and educational purposes and are not to be misconstrued as advice from the Author or WorldWideMarkets Online Trading. The above examples use levels that were determined with current market prices available during and right before publication. Accordingly, prices may have since changed, affecting whether the scenarios are applicable. Traders duplicate these scenarios at their own discretion and risk. The examples are not inclusive of spreads and/or any premium/cost-of-carry. The time horizon for key price levels to be reached, or whether they will ever be reached, can be uncertain. Forex traders must in all cases use their own discretion and be prepared for risk of loss before trading.