GBPUSD—support and resistance

Last Thursday I wrote that I shorted GBPUSD at 1.6246. The overall move looked corrective to me in the context of the large, sideways pattern. I added to that position at 1.6132, after the pair managed to close below the daily 200 SMA on the shorter-term charts. Obviously, while I don’t believe one should give into the house money effect, I was in profit on the first trade. I also placed a very tight stop on the second trade. Both are in profit as of now (10:32 AM EST), one at 336 pips profit and one at 222 pips profit. I took partial profits from the first trade, once at 1.6134 for +112 pips and once at 1.6014 for +232 pips profit.

What next? Obviously, I’m not going to bail out of short positions that could continue to run but there could be a bounce so I’m keeping my stop relatively far away. On the three-hour chart, the last candle had a longish, lower shadow and the current candle could close above it, hinting that the pair is rejecting lower prices for now. A close below that prior shadow would be bearish. On the one-hour chart, there have been three bullish candles for a short rise. The 4th candle that just completed has a small body. If the current candle closes deep into the third bullish candle, this would be an evening star. This all bears (unfortunate choice of word in this situation, I know) watching. Most likely resistance is:

1.5979 (today’s high)
1.6000/13 (round number and .382 fib retracement from 1/28 high)
1.6058/64/71/85/90 (polarity, various fib retracements, and uptrend line from March low)
1.6135 (speed line)
1.6220 (200 SMA on daily chart)
1.6314 (downtrend from November high)

Support levels are:

1.5851 (January low)
1.5833 (December low)
1.5731 (polarity)
1.5708 (October low)

Here’s the one-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.