GBPUSD: Bullish momentum testing medium term bullish resistance line
The daily candle chart below shows the GBPUSD pair testing the resistance line of a medium term bullish channel (point 4) after breaking above a medium term bearish resistance line (point 8) and a parallel bearish resistance line (point 9) since last week. This occured after following up a very short term bullish support line (point 1) where the pair is trading near 1.5667 (as of publication) in today's trading session.
The bullish momentum is consistent with the slope of previous bull runs (point 3) and considering that the pair has already broken above several significant resistance-lines, a breakout above a bullish channel could enable a steep climb towards 1.6000 in the short term. If this occurs a very long bullish candle could develop with static resistance near 1.5740 (point 7).
However, if resistance is found on the upper side of the medium term bearish channel (point 4) which is very close to the highs for today, then a reversal could continue down a short term bearish trend-line (such as point 6). If this occurs then a target of the two bearish resistance lines just below (point 8 & point 9) could follow with further support on the lower-line of the medium term bullish channel (point 4) and along the long term bearish resistance line (point 5) and medium term bullish support line (point 2) -both further below.
The short term momentum was correctly stated as bullish although a very-short term bearish pullback did occur as discussed in a previous article early last week -where the GBPUSD has since shifted lower and then continued up a newly developed bullish support line (point 1) –and approaching the converging resistance line of the medium term bullish channel (point 4) where a breakout or reversal may follow.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.5702 with a Limit to take profit @ 1.5758 and a stop-loss @ 1.5673 Risk/Reward Summary: Limit risk = +56 pips profit / (-29) Stop-loss risk = Gain to Loss ratio = 1.93
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.5639 with a Limit to take profit @ 1.5577 and a stop-loss @ 1.5679 Risk/Reward Summary: Limit risk = +62 pips profit / (-40) Stop-loss risk = Gain to Loss Ratio = 1.55
Daily candle chart: