Wednesday, February 9, 2011

GBPUSD—dragonfly doji

The best Cable could do yesterday was 1.6163 which is better than it has done this morning with a high of 1.6101.

On the three-hour chart yesterday morning, a candle known as a dragonfly formed with a low of 1.6029. These candles with a long lower shadow and open and close prices the same (or as in this case one pip apart), often serve to define where support is. Thus, if Cable closes beneath this, it would be quite bearish.

Another thing to notice on the chart is the series of steps down. The pair has currently climbed back to retest the last one so let's see what happens but I'm leaning towards a sell. I'd like to see a momentum failure on the short-term chart, divergence or bearish candles.

Support is at 1.6029/00, 1.5900, 1.5751, 1.5345, and 1.5274/64 (fib confluence) as well as the round psychological number of 1.50.

Resistance is at 1.6300, 1.6461, 1.6500 and 1.6878

Here's the three-hour chart:

© Dianne Fecteau, 2011. 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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