I trade this pair but not usually in this blog because it’s a hip-hopping, hard-rockin’ Mama—in other words, too volatile for most traders. The pair can move so quickly that by the time I take the trade and write the words about why, the pair has already made a sizeable move. Still, since things are so-o-o-o-o-o slow this morning, with everyone waiting, I guess, for the collective wit and wisdom of the Fed to spew forth this afternoon with their rate decision, I thought I’d point out a potential trade I’m looking at.
Two downtrend lines are converging. One is the longer-term one from the July 23, 2008 high of 215.92. The other is the shorter-term downtrend line from August 9 of this year that had a high of 163.02. The shorter line is at 147.84; the longer is at 147.49. The 147.50/90 area has been a support zone recently and this enhances its potential as a resistance level. Given that the pair is in an overall downtrend, this could prove to be an attractive level at which to sell.
There’s also a descending triangle on the chart. According to Bulkowski in his book, Encyclopedia of Chart Patterns, prices should touch the horizontal base at least twice. I’ve placed three small arrows to show that it has touched three times. Prices should also touch the down sloping line twice and it has done this as well. There’s a little too much white space for my liking but, hey, you take what you can get, and while it may not be definitive, it’s something to note. Bulkowski’s book can be found at Amazon. Encyclopedia of Chart Patterns (Wiley Trading)
If the price does approach resistance, it will be important to examine price behavior at the time. In addition, I again warn about the decreasing liquidity.
Here’s the daily chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.