I reversed my position yesterday and shorted at 1.3453 after the pair came off its high and made it abundantly clear it wasn't going to have the traction needed to go higher. This meant the remainder of my long was closed at +22 pips. I may take some partial profits soon.
How did the pair make this abundantly clear that it couldn't go further? The Euro has been very weak and fell off a high of 1.3525, a resistance level that it should have been able to overcome if there had been any force behind its move. I wrote yesterday that ideally it would stay above 1.3450. That it hasn't done but it's also apparently unwilling to simply fall and support looks as though it's coming in here at the 1.34 level although the low so far is 1.3385. There is a confluence zone here that may help the pair rally. There's also positive divergence on the three-hour chart:
More serious support is at 1.3366 and then 1.3312/07, 1.3283 and 1.3267. Resistance is at 1.3447, 1.3525, 1.3585/91, and of course, the infamous 1.3692. Perhaps it's finally going to break out of the range I commented upon yesterday although I wouldn't be surprised if it tries to head up again.
I have several appointments today so I won't be doing a lot of updating on the pair but if it looks as though it's rallying, a long might be the way to go, expecially if RSI bounces up from overbought. If you're already short, you may want to tighten stops to above 1.3447 and add to the position if it breaks 1.33 or if it looks as though the downtrend is accelerating.
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.