GBPUSD—trying to base

I bought a little while ago at 1.5562. Like every trade there's risk here as there is a chance for a drop to support in the 1.54 range (fib confluence, price support, the 10 EMA on the weekly chart at 1.5456, and the 10 and 20 SMA at 1.5455 and 1.5463 respectively). However, Cable looks like it's trying to base with two three-hour candles at 1.5505. The pair had a strong push up last week so this back and fill is to be expected. My stop can be tight; in fact much below 1.5530 would indicate the pair has too much supply coming in to be able to maintain a satisfactory push up in price but in any case the stop shouldn't be much below 1.55. A stop and reverse might also be appropriate. A lot will depend on the behavior of momentum.

Resistance is the weekly downtrend line and prior high at 1.5685, 1.5729, and 1.5874. Support is in layers between 1.5500 and the weekly uptrend line of 1.5408. Below that is 1.5384 and 1.5297.

Here's a 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.