GBPCHF: Tests bottom of medium term bearish channel
The daily candle chart below shows GBPCHF following a medium term bearish channel (point 1 on chart) which it just tested the bottom of - in the current candle - where if support can be found a return to the median line (point 2) of the medium term channel (point 1) may ensue with a target of the upper line of a short term bearish channel (point 3) right above the median line.
A reversal of bearish momentum may be less aggressive with GBPCHF following a potential short term bullish continuation similar in slope to those observed in recent history (point 5), if the support line of the medium term bearish channel (point 1) holds. In both cases, the long term bearish resistance line (point 6) may be a target if the current bearish trend is reversed.
If the bearish momentum continues and the support line of the medium term bearish channel (point 1) fails, then the static support line drawn at 1.4066 (point 7) could be a target for the GBPCHF in the very short term. Also noted is a medium term bullish line (point 8) that just failed in the current candle adding to the downward pressure. The bearish channel, among others were discussed in a previous article on the GBPCHF pair in mid June 2013:
Although a false breakout to the downside could also occur, a return to the median line of the channel appears more likely if current support holds.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.4278 with a Limit to take profit @ 1.4343 and a stop-loss @ 1.4240 Risk/Reward Summary: Limit risk = +65 pips profit / (- 38) Stop-loss risk = Gain to Loss ratio = 1.71
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.4189 with a Limit to take profit @ 1.4070 and a stop-loss @ 1.4267 Risk/Reward Summary: Limit risk = + 119 pips profit / (- 78) Stop-loss risk = Gain to Loss Ratio = 1.53