GBPUSD—consolidating

I bought yesterday at 1.5825 after decent momentum and a nice hammer formed at support on the three-hour chart. This was after last Friday's move down to 1.5670 which also formed a hammer and led to a nice rise. I was comfortable going back to my original analysis. As I wrote last week, "The drop took place on the last day of the month—it might only mean there was profit-taking in play….I still have a daily bull flag I'm playing off of and this is likely an EW C wave that isn't quite complete. I also have price targets from my point and figure charts that are higher. All those things looks bullish."

Now of course, with respective highs of 1.5923 and 1.5914 during the last 24 hours, I'm going to have to see if 1.5998 (early August price) will still cap it. As a result I took partial profits earlier this morning of +70 pips. If it can't overcome 1.5995 then support is at 1.5750, 1.5670, 1.5549, and 1.5349.

I think there won't be long to wait before an answer of some sort. On the three-hour chart you can see a rough diamond pattern. This is consolidation before a bigger move. As Bulkowski explains in his Encyclopedia of Chart Patterns (2005) a break from a diamond can be a fast-moving one. The problem here if it breaks upward (which could be expected when a diamond forms after an uptrend) is that 1.5998 resistance. But if it can overcome that resistance, 1.64 is possible.












© 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.

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