Talk about being on fire... we are going really well this trading week. The market is giving us ideas and our analysis is giving us the confidence/courage to act on them.
After successfully predicting yesterday's FOMC outcome today we are taking a light step into the markets by trading the FTSE down.
Here's what I am thinking... AUD, EUR and JPY are all in a bit of trouble with their respective central banks being a little more dovish in recent time, this has and is pushing the GBP higher than these 3 pairs. Versus the USD the GBP is doing pretty well too thus making the GBP stronger than most of its trading partners and since the FTSE has a reverse correlation to the GBP (Strong GBP = Weak FTSE) it is a good time to sell the UK100 (FTSE).
But, we are of course not just going into this trade because of the above reason, our chart, the most important factor to open a position, is telling us that the FTSE will make a bearish move very soon. (hours/days).
Let's take a look at all the key details we have on the daily FTSE chart.
As you can see we are trading a head and shoulders formation on FTSE, the recent pull back in price action (last 3 days) brough price right to the 60% reversal level and key support turned resistance.
Our EMA and DC are above price action and they are the furthest they have been from price in the last 4 months which indicates that we could see bearish movement.
Lets now take a closer look via the 4-hour chart.
As you can see we have a few more support areas by looking closer. The white trendline supports recent resistances, the 30 EMA is right at the top of price action and the 60% level of recent price action clearly says RESISTANCE!!!
So, I am taking this down. My entry is 7268.2, my SL is 7340.2 and my TP is 7100.
The risk reward is not a huge difference, it's merely a 1:2 risk/reward but I am going to try and compound any bearish movement thus increasing my reward but at the same time removing my risk.
Want to know how I compound? Attend one of my workshops, webinars or seminars. For more details head to the events tab on our website or just click here.
While I am promoting, let me tell you this too. Today at 17:00 GMT I will be hosting a premium webinar that will cover charting. This webinar will show you exactly how I predict big moves (like yesterday's FOMC), find trades quickly and analyze the charts (any chart.). Follow the same process, just head to the events tab to register your seat. If you can't attend the event, then you can still get a recording of it by registering and requesting the video.
From me and everyone at PipsMatter.com, happy trading!