USDCHF: Bullish channel regained after bounce on long term support line
The medium term chart below shows the USDCHF pair following up a steep short term bullish support line (point 2) after finding support last week on a long term bullish line (point 7) and trading near .9343 (as of publication). The pair has since regained a long term bullish channel (point 4) and nearing a theoretical equidistant short-term bearish resistance line (point 1) which could provide a reversal down a steep bearish line (point 5) if validated. Alternatively, if the current trend line (point 2) and the support line of the long term bullish channel (point 4) fails, then a reversal – also down a steep bearish line (such as point 5) could developed - with a target of the long term bullish support line (point 7).
However, since the long term bullish channel (point 4) has been regained and the current short term momentum looks bullish, a continuation up the existing short term steep bullish line (point 2) seems more likely (especially if point 1 is overcome). The medium term trend still remains choppy as discussed in a previous article on the pair in the beginning of August 2013.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ .9425 with a Limit to take profit @ .9482 and a stop-loss @ .9381 Risk/Reward Summary: Limit risk = +57 pips profit / (-44 ) Stop-loss risk = Gain to Loss ratio = 1.30
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ .9299 with a Limit to take profit @ .9231 and a stop-loss @ .9344 Risk/Reward Summary: Limit risk = +68 pips profit / (-45 ) Stop-loss risk = Gain to Loss Ratio = 1.51
Medium term daily candle chart: