GBPUSD: Attempting to hold on to support to avoid bearish continuation
The daily candle chart below shows GBPUSD following a short term bearish channel (point 1 on chart) which it recently broke out of after finding support on medium term static lines around 1.4800 (point 6). The bearish momentum overall and channel, among others, was discussed in a previous article on the GBPUSD in early July:
Currently GBPUSD is attempting to hold on to a medium term bullish support line (point 2) coinciding above current prices of 1.5085 (as of publication) or else continue its descent on the upper resistance line of the bearish channel (point 1) that it just escaped and which it could re-enter and continueinto a steeper bearish channel such as those observed previously in this channel (point 4) which could repeat.
However, if support can be found near current prices and along the medium term bullish line (point 2) then a continuation along trend lines similar to the slope of previous very-short term bullish runs (point 3) may follow with a target of the long term bearish resistance line (point 5).
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.5130 with a Limit to take profit @ 1.5230 and a stop-loss @ 1.5076 Risk/Reward Summary: Limit risk = +100 pips profit / (-54) Stop-loss risk = Gain to Loss ratio = 1.85
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.5057 with a Limit to take profit @ 1.5001 and a stop-loss @ 1.5089 Risk/Reward Summary: Limit risk = +56 pips profit / (-32) Stop-loss risk = Gain to Loss Ratio = 1.75