GBP CAD Full Analysis For W/C 6th February 2012

GBP CAD Full Analysis For W/C 6th February 2012

GBP CAD is one pair that really hasn’t responded to my previous analysis. I loved the idea of the Daily Ascending Triangle formation that would finally form a break-out from the 12 Month trading range. Thus far, that hasn’t come close to materialising and further technical damage has been done since.

Because of it’s choppy nature and wide spread, it’s an FX pair that can reward you greatly when on the right side of the trade, but can quickly do you some damage if you get it wrong. I tend to trade this pair with small stakes and wide stops.

The daily chart looks pretty sad with Friday’s bearish engulfing candle from a previously supportive trend line. Looking at it as a potential short entry I’d probably be looking to run a stop loss above the high of Friday’s candle or above the 9th January candle (the one that tagged the green 200 MA) and run a 400 pip limit order to cover at the next major supportive area at approximately 1.5300

The risks are: Friday closed above the 20MA, the 200 MA didn’t get tested and will probably be a future upside target, and since July 2011 the pair has printed higher lows.

 

The 4 hourly chart gives a good appearance of being primed for strong continuation of the current down trend, with the only risk here being that the 100MA is trying to offer support at a level that combines with an unlikely but possible right hand shoulder of a bullish Inverted Head and Shoulders pattern. One or two 4 hourly closes below the 100 MA would probably be enough confirmation that this potential bullish scenario will fail.

The hourly chart is a little more messy in that price broke out to the upside of a triangle and has since failed and broken back below it. As the daily candles on this pair generally over lap quite considerably, I’d be very interested in entering short at the 50% retrace of Friday’s move. In fact, an entry like that, although with low probability of playing out, would be an absolute gift of an entry and going by MACD’s very over sold condition, it would fix that too.

With all things considered, this does look like an attractive trade, in fact it wont take long to make it a very attractive trade, but, my previous long term GBP:CAD analysis was wrong and I do bear this in mind when entering subsequent positions, though it rarely puts me off as I’m comfortable with being proven wrong again for as long as I manage the risk.

There is a flip side to this trade. Above Friday’s high and we could very well have a bullish scenario and I’d quite comfortably start looking at the long side, but for now that really seems quite unlikely.

6 Comments
  • AUD JPY Technical Update For W/C 6th February 2012
    Posted at 22:32h, 05 February

    […] Update For W/C 6th February 2012 Posted in: AUD, JPY By: RS2OOOUnlike the previously discussed GBP CAD, if there is one FX pair that has precisely followed my road map over the last 6 Weeks it’s […]

  • RS2OOO
    Posted at 21:56h, 06 February

    Entered short tonight at the hourly back-test circled red in the above chart.
    A little slow with the entry, at 1.5770

    Stop loss is initially above the 9th Jan high, but I feel if the trade is wrong we should start seeing signs prior to that level being reached. If the hourly 200 MA proves to be support (currently being retested from above) this will be the first sign that things are not right.

    A break above or certainly a daily close above the high of Friday’s bearish engulfing would deeply concern me.

  • This Week's Swing Trading Review; 11th February 2012
    Posted at 12:29h, 12 February

    […] isn’t a lot we can do about it and changing brokers is usually a pointless exercise.The GBP:CAD short goes into the Weekend showing a tiny profit but again this was an incredibly volatile pair […]

  • USD CAD Short Term Outlook With DOW as Backdrop: 13th February 2012
    Posted at 22:10h, 13 February

    […] factor in this decision, this long position has the potential to act as a hedge against my existing GBP:CAD short position (showing a 10 pip profit as I type). Ultimately the real decision for the basis of […]

  • GBP:CHF Long Re-Entered And Mid Week Update
    Posted at 23:43h, 15 February

    […] for a daily close below 1.3000 as confirmation to continue holding the position.I checked on the GBP:CAD swing short this morning and it was close to 200 points profit so I set a trailing stop loss at […]

  • RS2OOO
    Posted at 23:47h, 15 February

    I checked on the GBP:CAD swing short this morning and it was close to 200 points profit so I set a trailing stop loss at 1.5652 without really considering that it might be reached. Price rebounded sharply from the morning lows and next time I logged in I was disappointed to see the trade had stopped out, though a tidy 118 points was banked and I was encouraged by the fact that price has rallied a further 50 points since then confirming that I was right to set the stop loss where I did.