10 Feb Cable at Support for Short Term Long Position
I’ve entered a long position in GBP:USD tonight. It’s not really a position I’d consider a Swing trade though it may turn into one, it’s simply a trade based on historic topping patterns previously seen in Cable.
Looking at the 4 hourly time frame we have an area of support (not a precise support level) that should soon come together with the 4 hourly 100 MA. It’s difficult to tell whether Cable has topped or whether we’re experiencing a pull back in an up trend, but regardless of that, the first pull back to the 100 MA in an uptrend generally finds dip buyers.
Further to this, the possibility remains that a Head and Shoulders formation is in progress, in which case we’d expect to see a right shoulder in an attempt to test the high of the left shoulder if a top is in place, or to retest the ultimate high with a view to continuing the rally. If my long position plays out well, I’ll be closely watching the underside test of the blue 20 MA, failure here would have me exiting the trade. Note that MACD looks ugly.
Moving to the Daily time frame, this chart shows the most likely area of support which will help define stop loss positioning, and I’ve circled a few examples of previous topping action where you can see in almost all cases, a retest or an attempt to retest the high took place. Again, MACD is not pretty but at this stage of the game, we have no confirmation that the rally is finished, and previous history shows high probability of at least an attempt to find strength going forwards.
Most retail traders are likely to consider a trade like this as nuts, but I’ve done pretty well out of similar setups in the past. After all, every trend has a pull back, you don’t want to be selling that pull back unless you’ve got very good reason to, or, until a confirmed lower high is in place.