GBPUSD PULLBACK INTO MAJOR SUPPORT. BUYING OPPORTUNITY?

27 lip 2014

GBPUSD big picture is generally bullish. More recent price action shows some weakness. Price action is now nearing the first significant support level in week. Situations like this I view as a buying opportunity on a swing trade basis. This means if I can get a price validation, I will look to get long and hold on for a few days at least. This is a strong pair pulling into a support, a level that can attract buyers. The key is waiting for validation.

The trade idea: If price validates within the 1.6883 to the 1.6946 area, I will be looking to build a long position. I will use 1.6840 as my max stop price and as a reference to measure risk. Remember after validation occurs, there may be additional prices to add to the position. Also keep in mind that price may find support just above the 1.6950 area which is a variation of the setup I look for. If it validates there, I will also look to go long, and adjust for the added risk.

First target is the 1.7015 area. It is a retracement of the previous swing and provides at least a 1:5/1 reward to risk assuming I get in at the worse price of 1.650 area. Obviously I am looking to get a better entry price.

Second target is the 1.7050 - 80 area. Much more aggressive but worth trying to hold on for since this pair is generally strong.

Strong markets tend to retest previous highs, and occasionally break to new highs. If you can afford to hold on, I think it is reasonable to give this pair a chance to retest the 1.7180 area because of its strength. Keep in mind this can take a week or more to unfold so patience and flexibility to necessary.

If the GBPUSD closes below 1.6850 area with conviction, then I will reevaluate my long scenario. In this case, the pair is indicating further weakness and I will want to look for potential short opportunities if they make sense.

Remember anyone can trade, but not everyone can trade consistently. I help people develop consistency in their trading, It's not easy, and takes time, but is well worth it once you get there. And the entire process begins with good analysis. Here is an article that I wrote about analysis that I recently conducted on AMZN. Check it out here: unconventionaltrader.com/amzn-long-setup-possibility-learn-by-example/