Sophia Todorova has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.
A set of double tops can be seen on the daily chart of the Gbpchf currency pair. The double tops resulted from a test of the critical weekly resistance where there is a convergence of a down-sloping trendline as well as a shelf of previously broken support, marked by a horizontal line on the chart below.
The reaction to this resistance presented good shorting opportunities: the first instance brought the pair down for a retest of the daily trendline at 1.5420s that was broken to the upside. It was at this point that we went long some days ago. In reference to this daily chart, price is seen supported above the new up trendline. This is another critical point from which we could expect the next leg up or down. It has been consolidating for the past 24 hours, and a breakout might happen soon. I do like this pair, and would definitely like to be in on whatever trading opportunities it might be offering, so I have outlined two scenarios below relating to possible direction from here:
CASE FOR SHORTS
For a short entry, I would like to see a breach of the new up trendline on the daily timeframe, located at 1.5660s to confirm shorts, after perhaps a retest of the newly broken trendline. Potential targets are: 1.5530, which is the right tip area of what could turn out to be the new uptrend. Another short target could be the outer trendline at 1.5360.
CASE FOR LONGS
Making a case for longs is more complicated in the light of the overwhelming bearish evidence. In order for me to consider taking a long trade, I would have to see considerable reversal signs on the 4-hr and daily timeframes. It would likely be significantly based on price action also, and extreme care needs to be taken. I say this, not only because the main trend is still down, but a bounce to the 1.5800 area would bring the pair to what looks appears to be a bearish head and left shoulder pattern on the 4-hr chart. Targets for long trade setups, should they take place, are: 1.5800, 1.5850, up to the weekly resistance. Follow-through action would need to take place there to set the stage for a test of the next major resistance point at 1.6650.
Thank you for reading. Please let me know what your thoughts are also 🙂 You can also follow me on twitter to receive updates on this pair.
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