Thursday, February 25, 2010

EURGBP—near tough resistance

This pair has continued to climb but is now at formidable resistance. I closed my first position from .8699 at +123 pips. I still have my second long position from .8760 which is obviously profit stopped.

Resistance is coming in from previous highs (.8833 on 1/17; .8842 on 2/11; and .8836 on 2/23). There are two schools of thoughts about a pair repeatedly coming up on previous resistance (or support). One thought says it will usually fail again and traders go short. The other sid, most notably written about by Gann, says it will eventually break through. Obviously, those traders go long on a breakout. However, there are other considerations besides just the strong price resistance. A downtrend line from October is coming in at .8846 and the pair is in an overall downtrend. Polarity is also at the .8845/.50 price level. There's negative divergence with RSI on the three-hour chart below. The pound's sorry state is probably what has kept this pair going up the last couple of days but I'm not sure that's going to continue.

Support is at .8751, .8690, .8665, and .8603. Resistance is at .8850, .9028, .9053, and .9124.

Here's the three-hour 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.

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