GBPUSD—correcting

My short position from 1.5995 was taken out in the correction yesterday at 1.5745 for a profit of + 247 pips. My short from 1.5871 is still on, although it came within a hair of being taken out as well.

While it still looks like a bear flag on the shorter-term charts, the daily chart shows the pair dancing on a downtrend line from early August, 2008 and that formed a significant channel. A definitive drop below that line, currently at 1.5535/45, would be deadly for the pound as it would also be below the low of 1.5535 from Monday. It's a real nail-biter as to whether it will happen or not and the indecisive candles reflect that. I may add another short position if it does decisively move.

Support

1.5535/45
1.5359/75 (polarity; Jan 7th high)
1.5000/24 (flag target; round number)

Resistance

1.5764 (top of flag on 3-hour chart and today's high)
1.5800 (round number; fib confluence)
1.5850 (EW boundary for current move down--wave 1 so wave 4 can't enter its territory)
1.5986 (Fib confluence)

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.