My reasons for doing so were primarily based on the hourly chart so this should be a short-term trade. The pair appeared to be trying to base at 1.2523, RSI had dipped slightly below 30 and come right back up, and there was positive divergence with RSI. In addition, one could trace five waves down from the high at 1.2722 so the next move could be corrective, in this case up. Euro did bounce rather quickly up but only about 40 pips. However. this was enough to allow me to move my stop to breakeven. I also took partial profits at + 40 pips.
Since the trade is on the hourly chart and thus expected to be short-lived, an easy target is .382 of the move from 1.2722 to 1.2523 which is 1.2599 or .5 of that move which is 1.2623. There's a short-term downtrend line at 1.2590. The move back to 1.26 has brought out sellers so it makes sense that the pair is hesitating here.
Within a larger context than the hourly chart, i.e. daily and weekly, another down move is possible—the issue may become where to go short. If I wasn't long and in profit I'd probably try a small short at 1.26.
Resistance is at 1.2600/14, 1.2740, 1.2765, 1.2800 and 1.3094. Support is at 1.2523, 1.2480, 1.2397, 1.2312 and 1.2152.
Here's the hourly 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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