02 Aug High Risk GBP:USD Long Position Taken
Over recent Week’s Cable has been trading a relatively large range of approximately 400 pips. The overall trend on the Weekly chart is down, but on smaller time frames there is no trend at the moment, only a range that will eventually break into a trend.
Whilst price is trading in a range it’s relatively common for traders to make a decision as to the outcome of that range, but in reality the range itself is proof that there is indecision within the Market. The only way to capitalise on that indecision is to ignore any overall directional bias and play the range as it forms.
In the case of GBP:USD on shorter time frames that range has run a sequence of marginally higher lows whilst resistance has been repeatedly found at 1.5736 region. This could be indicative of an ascending triangle formation or looking at the chart the possibility of a bullish inverted head and shoulders pattern, but in reality these potentially bullish patterns can fall apart through time decay.
Therefore, the long position I’ve taken from 1.5550 must for now be considered as a range trade initially targeting the top of the range with stop losses placed below the range.
As the charts show, it’s not a super-attractive trading set-up, but similar patterns previously seen on Cable have more often resulted in upside breaks than downside breaks, so I’ve decided to take a chance here, noting also that I still hold a EUR:GBP long which may help hedge this trade were it to go disastrously wrong.
This Hourly chart shows the support from where I entered the position and price remains on this support as I type. It’s certainly not pretty, but we could possibly have an Inverted Head and Shoulders pattern forming here, though it could also be a bearish harmonic and therefore I’ve ignored the pattern itself and focussed solely on the support level when deducing my entry:
The 4 hourly chart shows strong resistance at 1.5736 but each attack of that resistance has come from higher lows, meaning that an Ascending Triangle may be in the forming:
I don’t think this is going to be an easy trade to sit through, but it does hedge nicely alongside other positions I currently have open. Stop losses are presently around 110 pips away from entry, though I will be monitoring these closely as price develops.