The remainder of my short profit-stopped at +20 pips. I bought this morning at 129.05 and have just taken partial profits at +160 pips. I don't normally write about the Guppy trades in this blog because of its tendency for fast moves and the pair is tricky to trade. In the last 24 hours I've been long, short, and now long again. I don't usually get in and out of trades so quickly as one can make more money waiting for a pair to begin trending. Very short-term trending is tough to trade and tough on the nerves. So, if you're reading this and you're new to trading it's probably best to avoid this pair. If you learn anything from my writing about this pair it should be that you need to be flexible to trade. Don’t let yourself be mired in your prior analysis. Changing your mind is OK as long as it's not an emotional reaction to price moving on the screen and is because additional analysis provides you with more information.
So why am I long? The move from 128.79 to 133.63 looked as though it was a three-wave correction. But because it rebelled against going lower at 128.66, I'm wondering if that move was wave A of a three-wave correction. If so, it may have completed wave B with the low of 128.66 yesterday and now be in wave C of an Elliott flat correction. All this is hypothesis. I can't prove it until after the fact (one of the reasons you can't really trade Elliott by itself).
But there were other reasons to try a long position. On the three-hour chart I have positive divergence (and the same is true on the one-hour chart). Now divergence has been common lately so I'm not overly excited by this. But it's one more clue.
Looking at the daily chart one can see a range from May and prices are near the bottom of the range. This leads me to believe I have support around 129. Yesterday I wrote about a support line at 129.05. So the chance to buy there this morning was irresistible since I could have a tight stop. On two of the last six daily candles, I have lower shadows which hints that lower prices are being rejected for now even within the overall downtrend.
Between 130.10 and 130.33 is price resistance and currently the pair has gotten above it. So now let's see what happens. Additional resistance is at 131.41, 132.03, 132.75, and 133.68 (daily 50 SMA). Support is at 130.10, 129.45, 129.05 and 128.66.
Remember, if my hypothesis is correct and this is wave C, it will head down again at some point.
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.