GBP CHF Full Analysis 26th June 2012

GBP CHF Full Analysis 26th June 2012

I’ve been told off through a couple of recent comments about the lack of updates to the site! It’s certainly true that I’ve missed out on a couple of great trading set-ups that I’ve not had chance to post nor enter simply due to lack of time to spend at the screen and updating the site.

The original plan for the site was to use the time I’d have otherwise spent day trading on updating the site and analysing prospective swing trades but for the last couple of Months I’ve barely been doing either of those things due to commitments elsewhere. 

It does bring with it a couple of advantages, not least a better mental state of mind that one doesn’t always have to be in a trade. Furthermore, the well chosen swing trades I have taken delivered great results which is surely better than jumping into every trade possibility and snatching a few points here and losing a few points there.

Anyway, in view of those comments I’ve decided to make an effort and post some analysis of one of the FX pairs on my watchlist. The deeper I delved into analysing GBP:CHF the more contradictions I came across through various time frames, meaning this pair needs more work before a confident swing can be taken in either direction.

Starting with the Weekly chart my initial bias was for some upside following a breakout through the 1.5100 resistance area targeting the combined 61.8% fib level from the previous swing high and a tag of the falling 200 MA. It’s been 5 years since that 200 MA was last tested by price, so it’s certainly overdue another visit.

The one thing to watch here is the potential for negative MACD divergence which isn’t a good sign in the early stages of a major trend reversal. To avoid MACD crossing down, price needs to start rallying almost imminently:

Looking at the Daily chart with a bullish bias we can see that following a powerful rally, price has spent much of the last 6 Weeks going through a consolidation phase just beneath 1.5100 resistance which should ultimately have a bullish outcome in the longer term. There’s plenty of upside room for MACD too:

Here’s that same channel on the 4 hourly time frame. If I happen to have the chart open when price reaches the upper channel line, I’ll probably take a closer look at smaller time frames and take a day trade short from here, only considering a long as a swing trade on confirmation of an upside break:

The Hourly time frame displays an ascending triangle pattern, normally a pattern that results in a bullish break out, but this pattern is accompanied by negative MACD divergence which suggests caution on the long side and adds weight to the potential for an intraday short from the 4 hourly channel detailed above.

If price does break out with some power from this ascending triangle, then a successful back test finding solid support would be the cue to entering a swing long, but for now I’m not sure of the likelihood of that in the shorter term:

In conclusion we’ve certainly got some mixed signals here across various time frames. Sure, going by the Weekly chart alone I’d be happy to enter long right now, but the stops would need to be incredibly wide and that’s not ideal because any pattern or set-up can fail at almost any time. So, the plan here is to bear in mind all of the potential risks, the levels of support and resistance across the various time frames and position accordingly for the time frame you are trading.

If sticking strictly to longer term swing trading, then the best reward would be offered through buying a break of  or a successful back test of resistance/support in the 1.5100 region, but if smaller time frames can get us into such a move earlier that would allow us to get stop losses into profit sooner, removing the need to screen-watch the trade.

4 Comments
  • RS2OOO
    Posted at 17:50h, 26 June

    GBP:CHF broke out of the falling channel this morning with considerable momentum.

    Buying break-outs is a strategy I struggle with as normally I like to wait for a successful retest of the break-out level or a pull back, but in this case I’ve simply entered long with stops below today’s low.

    My day trading system is likely to go short on a 5 minute close below 1.500 so I will be watching this very carefully and may abandon the swing if this occurs with a view to re-evaluating the trade and awaiting further confirmation that an upside move is likely to be sustained.

  • RS2OOO
    Posted at 22:45h, 29 June

    GBP:CHF long was stopped out on the overnight “Euro is saved” news.

    -100 points.

  • Weekly Swing Trading Round-Up 30th June 2012
    Posted at 17:50h, 30 June

    […] didn’t start that way but it certainly ended that way.Following the GBP:CHF analysis detailed here I was quite surprised to see a powerful break out the very next morning and after some indecision I […]

  • This Week's Swing Trading Round-Up 7th July 2012
    Posted at 01:21h, 08 July

    […] to run those positions for much longer than intraday.Having been stopped out of last Week’s GBP:CHF swing long, which of course has since rallied hard into a potentially decent sized profit, I came […]