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Reversal System: Indications of weaker GBP for the inflation hearings

November 21, 2017

In this report I will be going over a few GBP pairs for the upcoming UK inflation hearings which are expected to begin at 10:00 am UK local time. I will be using our "Reversal Strategy" to cover the GBP trades. 

 

Before I continue I do want to emphasize on one of the most important factors that help us to protect our losses in the markets. Yes, I am in fact speaking about Stop Losses but in this post we will be speaking a little bit about drop dead points. These "points" are areas in the market that if reached, will mean our trade idea was wrong and we should be getting out of the trade. 

 

For the sake of being successful in the markets you need to accept that you will be wrong plenty of times this is why cutting your losses will be the epitome of your success, the backbone of your trading system. 

 

Every person is different and every trader has different risk toleration, I like to earn big, so I typically risk more than the average trader, that means that sometimes my losses are quite big but this is something that I accept.  

 

Anyway, what I wanted to tell you is that if you are to be a winner on a monthly, quarterly and yearly basis, you will need to accept that you will make mistakes (bad analysis) and you will take losses this is why you need to have "drop dead points", clear, predetermined areas where you give up on the trade idea and take the loss and you take the loss like a "man". 

 

Thats it, if you can apply this to your trading, you'll live longer and you'll be happier! Now lets head into this analysis!

 

We are going to go over GBPCAD  and GBPUSD. We'll start with GBPCAD.

 

GBPCAD, Daily Chart

 (click on image to enlarge)

 

In the above image you will find the 30% reversal (yellow) and 3 layers of take profits. I did ener a little early into this one as there still is 2.3 hours to go till the inflation hearings but this is not a fundamental trade, it is a 100% technical trade so getting in a little early is ok, although I should have waited for the 30% to be tested fully. 

 

We'll move down to the 4-hour chart now so you can see all of the reasons I am selling GBPCAD. 

 

 (click on image to enlarge)

 

So, as you can see the upper trend line is acting as a perfect resistance which is controlling the short-term uptrend. Based on my reversal system, I am getting excellent indications that GBPCAD will head lower during today's trading session and probably continue to do so for the rest of the trading week. 

 

I am scared of a shadow taking my SL out, as it is very possible that price breaks the 30% only to close below it. So if that happens, I might look to re-enter given the fact that price closes below the 30%.

 

At the time of writing this post, the 30% is being tested. My active risk on this trade is 8.37%.

 

GBPUSD, Daily Chart

 (click on image to enlarge)

 

GBPUSD is in a strong up-trend and we still believe that it will head much higher towards the end of the year and beyond into 2018 but we are only looking at today and this week in this post so I wanted to show you what could possibly happen with cable.

 

Price action is approaching our recent TP area (when we were buying), it is acting as a midway resistance in the uptrend channel, it is also the area of a possible triple top resistance. 

 

What I believe will happen is that price will retract back down towards the 1.32 level before heading higher again. 

 

I don't have much details on GBPUSD as I am long on this one but I believe a retracement back to the support trend line is a very possible scenario.

 

Generally all GBP pairs are at key trading levels which indicate that possible bearish movement could occur on the GBP in the very near future. Let's continue to EURGBP.

 

As I said above, the test is happening RIGHT NOW and this is the best possible entry price on GBPCAD, Oil is heading higher too which provides support to the CAD, lets see how price action behaves at the 30% and if this trade will work out. Only the market knows! 

 

Remember, manage your risks, everything else will take care of itself. 

 

Have an excellent trading Tuesday!

 

 

 

 

 

 

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