29 Nov GBP NZD – A Closer Look At Bearish & Bullish Technicals
The continually developing chart patterns of GBP:NZD have had me truly fascinated over the last couple of Months as bearish patterns develop within bullish themes and visa versa. Despite this there have been some very trade-able moves offering a large number of pips in a short time….albeit with a sizeable element of risk attached!
So tonight I’m just going to go through some of the various time frames and point out a few areas worthy of watching that should eventually prepare us for the “big move” whichever direction that may be when it eventually comes.
Starting with the Daily chart, beyond the very first retrace which I looked at for a swing short, price recovered and climbed up the inside of the “bearish rising wedge”. It was at this point I took a bullish view. We had a text book bearish pattern, but the MACD divergence that preceded it gave a clear signal that the medium term outcome was to be anything but bearish.
In the end, we saw a throw-over of the rising wedge with price crashing straight into combined Fibonacci and Horizontal resistance from which I entered short, but unfortunately closed early as I expected a sharp rebound to close that huge gap that hasn’t materialised thus far:
Looking at the Weekly chart we have a well defined down trend line which when combined with MACD divergence suggests a good probability of this eventually playing out as a falling bullish wedge. Until a break out occurs, we must ignore this bullish possibility and sell each touch of the down trend line until proven wrong. After all, the long term trend is very much down.
Finally looking out to the Monthly chart and we can see the main cause of resistance here is the 20 MA. So again, no long term bullish theme can be entertained until we see price gaining traction above the 20 MA:
So, the big question… How am I going to trade this?
Well, it’s clear there are a number of trade-able ideas, and being aware of all these scenarios is a good basis for trading this pair in either direction and having a sound ability to recognise when a trade is wrong and when a wrong trade is reversable. It’s all about understanding the various key levels and trading those that offer the highest technical confidence of a profitable result.
Therefore, some trades I’m likely to take in the near future will go something as follows:
If intraday technicals warrant it, a long entry with tight stop loss will be taken from 2.0368 area shown in the daily chart and a target of the gap close at 2.0871.
If technicals confirm, I would then look to reverse short at the gap fill with stop loss above the 2.0984 resistance based on a daily candle close basis. If price rallies beyond this resistance, it would be time to double check that Weekly and Monthly chart with a view to buying the initiation of a new longer term rally. Otherwise, I’ll run the “gap-fill” short as a longer term trade with a trailing stop loss.
I will post details of any new trades on this pair in the comments section beneath this post, and of course, I’ll write up a new post on any interesting developments.