02 Oct GBP CAD Range Trade Potential Short Entry for W/C 3rd October 2011
GBP:CAD has traded a choppy range for over a year now bouncing between 1.5300 and 1.6400 giving regular bursts of up to 1000 point thrusts throughout this time.
We now have a situation where it’s back at the top of the range so we need to get clues on what the next move is. Historically you can see from the chart that the extensions to the limits of the range were not quite as powerful as this current move, furthermore, it can take days or even weeks to finally roll over at the limits of the range. So we could be slightly premature in hoping for a trade as early as this week, but it’s certainly one to be aware of.
Signs I will look for before entering a short position will be a number of tests and daily Doji’s around the top of the range, by which time the 4 hourly 200MA will have caught up with price, and confirmation of the entry will most likely be a break back below the 4 hourly 200MA.
Of course, there is potential that price could break out to the upside, in which case to trade it safely with a long position we’d need to see a confirmed breakout followed be a dip back to properly re-test the top of the current range. If solid support is offered, we could then enter a long position, if support fails, we switch back to the short idea.
For now, keep it on the back burner because one thing is for sure, there is a good trade in here somewhere and we just need to let the market show us it’s hand before making a decision to enter either long or short.