EUR AUD Box Trade Short Set-Up in Motion

EUR AUD Box Trade Short Set-Up in Motion

Probably posting this potential swing set up a little on the early side, but it demonstrates how far out I begin to plan a potential trading set up and allows me to follow and understand the way a particular Index or Forex Pair is moving before taking an entry.

If this plays out and offers a trade, it will be the 3rd Box Trade Set-up I have traded, the previous 2 of which were very powerful moves.

Daily chart shows that price fell from it’s trading range and is now showing signs of heading back to retest that old range. If that retest can coincide with the 200 MA, then odds favour the the trade even more. I’d expect price to marginally break back into the range and an ideal short entry would most likely be in the 1.2974 area.

When planning a trade so far in advance I’m sometimes asked “If you are so confident about the set-up, why don’t you trade the long side and reverse short when the target is reached?”. It’s a good question and sometimes I do trade the path towards my ideal reversal set-up, but at this moment in time the long side is not too attractive and here’s why.

The 4 hourly chart shows a bearish descending triangle within the confines of a larger triangle. I’d have expected the break of this triangle to have been to the downside, yet it broke out to the upside and a bullish move that broke out from a bearish set-up does not inspire confidence, hence I’ve not entered a long position.

Furthermore you can see that despite the higher high on price, MACD has not made a higher high and during the ‘bearish’ consolidation phase was actually making lower lows, which suggests the upside momentum of this move is a little on the weak side. For now, there is nothing to inspire confidence in taking a position for further upside, however, a pull back finding support in the 1.2478 area and above the 200 MA might start interesting me in a long position.

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  • Pingback:This Week's Trading Round-Up 6th April 2012
    Posted at 17:19h, 06 April

    […] at the same time I’m also cutting out some of those trades that could incur a loss.I liked EUR:AUD for the box trade short, didn’t take it because it left a gap on the daily chart. I’d […]