Cable (GBPUSD) 010916

How to trade this plan
1. Support and resistance zones shown in green and pink with arrows indicating direction. Bulls buy at support and bears sell at resistance.
2. Keep in mind that when price breaks through support the level will be tested in future as resistance – this is called role reversal.
3. Market direction indicated by 21 and 55. Take note of where the 21 is in relation to the 55 and where price is in relation to the 21. Also take note of the width between the two moving averages. If price is below the 21 you may consider looking for selling opportunities. If the 21 is dynamic resistance then if price falls from the 21 it predicts a lower low – the opposite applies when the 21 is dynamic support. If the 55 is dynamic resistance then if price falls from the 55 it predicts a double bottom – the opposite applies when the 55 is dynamic support.
4. Direction of price is indicated by 5 and 8 MA’s and stochastic cycles. Remember that when you line up higher and lower time frames, price is going in the same direction. The goal is to line up market and price while using support and resistance as your leading indicator.
5. Pay attention to reversal patterns on higher time frames when in a trending market – a reversal pattern could mean the end of a trend. Keep in mind that a reversal pattern that is not at support or resistance is meaningless.
6. Pay attention to reversal patterns on lower time frames when confirming your entry and if you want additional confirmation wait for a 5 8 cross on M5 or M1 before entering your trade. Remember – we enter on the second chance on the 5 minute chart.
7. I have added a summary under the H1 chart indicating observations and trade plan.

Note:
a. Please read Kate’s post on Forex Major Currencies Outlook everyday so you are up to date with the latest news. You can follow Kate here
b. Please be aware of risk events for the day by using the Forex.Today calendar
c. Watch Wayne’s webinar daily at 13:30 SAST or catch the recording on the Forex.Today Youtube Channel

Currently in a range. Daily stochastic says down. H4 stochastic is moving up towards overbought. We saw a very bullish move off of WM2 yesterday though price has failed to make a higher high above WPP. Having said that we did close higher than we opened yesterday which is bullish. Looking at H1 we are currently at DM3. I am watching the support below where the H1 21 currently is. If price falls from DM3 and breaks that support zone, I will look to sell the pull back at the new MPP - note the target for the day would then be DM1 - which is back in the WM2 area. If bulls buy at support below, or if price breaks through DM3, then I would like to see a higher high above DM3 and then look at buying the pull back. One last point - have you noticed the head and shoulder pattern that's busy forming on the H4 chart?

2 thoughts on “Cable (GBPUSD) 010916”

  1. Miles says:

    I was reading your nice post and appreciating the head and shoulders forming while the pair just skyrocketed in 1 minute! Power of the fundamentals! Not even a chance to enter… just watching the marvel like fireworks 🙂

    1. Yeah there wasn’t even a pull back – shot up like a rocket… And only an idiot would have bought at resistance – pity the fool that didn’t wait for a lower low before selling thinking that price wasn’t going to break…

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