GBPCHF: Ways to trade the recent price action.
Wednesday June 19, 2013 16:30 UTC
The chart shows a bearish trend in GBPCHF (point 1 on chart) continuing as it has broken below a medium-term bullish channel (point 2 on chart) and testing just below it on a lower shorter-term parallel bullish-support line (also point 2 on chart). Although a convergence of longer term trend lines is approaching (point 4 on chart), the short term momentum has been bearish, and is trading near the lower side of a developing triangle.
Failure to hold any support at current levels could cause GBPCHF to test lower within the existing short term bearish channel (point 1 on chart). Although the medium-term trend is bullish, the short-term momentum is bearish overall -with potential continuation within existing channels.
If current support holds 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 bearish continuation if the trend continues or a bullish reversal if the trend reverses and bullish support lines can be regained.
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @1.4490 with a Limit to take profit @ 1.4566 and a stop-loss to cut losses @ 1.4426 Risk/Reward Summary: Limit risk = +76 pips profit / (-64) Stop-loss risk = Gain to Loss ratio = 1.19
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.4326, with a Limit to take profit @ 1.4270 and a stop-loss to cut losses @ 1.4383 Risk/Reward Summary: Limit risk = +56 pips profit / (-57) Stop-loss risk = Gain to Loss Ratio = 0.98