Elliot Waves: Short trading setup for GBPUSD

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First, let’s revise the  Weekly technical analysis:

The current Cable’s rally is rather a function of weaker dollar than a stronger Sterling. There is nothing bullish about UK economy at the moment. This rally, in my opinion, has no fundamental support and it is likely to fade soon. GBPUSD is now trading within a major resistance and I would expect this market to correct to the downside in the short term.

Manufacturing PMI added more bearishness to British currency. PMI came out at 49.2, lower than expected 51.3. This is another blow to UK economy. This is lowest PMI in years. Anything below 50 is treated as a contraction.

gbpusd short 4 hFrom a technical perspective, there are few reasons to short GBPUSD.

  1. The price reached 1.4760; this is a major Pivot Point ( WM4)
  2. The price collapsed right after forming an engulfing candle on daily charts. This candle closed below two previous trading sessions.
  3. Stochastic divergence is clearly formed on daily charts. Se the stochastic oscillator guide to understanding the importance of this indicator.

I will be looking for the price to pull back towards 1.4600 level. This is a good technical level to enter low-risk shorts.

It is a 38.2% Fib retracement and the former support, which now became a resistance.

gbpusd short 1h

Date: 05/03/2016
Price: 1.4600
Trade: Sell Limit
Lot Size: 0.03
Stop Loss in Pips: 120
Take profit in pips: 300
Risk of Equity: 2%

My Trading Checklist

Is the market risk off or on? SP500, DAX, NIKKEI. Are the down or up: Not clear to me
Is this trade with the trend?: Reversal
Did I see it yesterday?: Yes
Is this a pullback measured by Fibs?: Yes
Am I buying support?: N/A
Am I selling resistance?: Yes
Is this entered during London’s session?: Not sure. It’s a pending order
Did the price pulled back from 200MA on 15Min?: Yes
Are stocks extreme on multi charts?: Yes
Where is the price in terms of Pivots Points?: Resistance

Disclaimer. The views and opinions expressed in this blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer or company. Assumptions made in the analysis are not reflective of the position of any entity other than the author – and, since we are critically-thinking human beings, these views are always subject to change, revision, and rethinking at any time. Please do not hold us to them in perpetuity.


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