Both my long positions from December 29 stopped out at +20 pips.
I’m inclined to walk away from this pair since I’m getting tired of its narrow little ranges where it doesn’t seem to really go anywhere after its first burst up in October which is so last year. Looking at the daily chart, you can see how it formed a coil which it seems to have broken away from and, alas, in a downward direction. Its most recent low was 1.0367 and it’s edging back to that level now. You also see how it has broken three uptrend lines since October. Three is usually the magic number for me.
The purple lines on the daily chart are from calculations I made back in October for this pair and it barely began to graze them before stumbling. So is it basing as I’ve maintained or was this the final death rattle before it resumes its drop? That, dear friends, is the question.
If I continue my stance that the pair is basing and if I decide to be aggressive, I could try a small long as it approached its low. However, this is risky because there isn’t much encouragement to do so. Momentum, as measured by RSI, needs to stay above 36 for this to be defensible—that is, if I went long and it dropped below that level on the daily chart, or drops below 1.0340 in price, I’d get out of the trade. The 1.0340 is approximately where the long term uptrend line from November 2007 comes in as I wrote last week. It also gives some wiggle room below the low of 1.0367. If you’re a new trader, I would stay away from this pair for now.
Here’s the daily chart:
© Dianne Fecteau, 2010. 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.