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GBP/USD Short Term Selling Opportunity

Last updated 4/14/2009 7:47 PM EST (GMT -5) 0 Comments - Add your comment

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Bradley W. Gareiss

Technical Analyst, GFT

The GBP/USD has been in a sharp downtrend since November 2007.  The pair began to move sideways at the end of 2008 however, and it has not dropped as sharply as before.  The pair is rising towards significant resistance caused by a bearish 3 drives pattern.  We also see that we would be selling the pair at the past 3 significant highs as shown on the Daily Chart. 

We are looking to sell the GBP/USD if it rises to 1.4985 (Point D).  Point D is located at the convergence of the following points:

The first thing you should notice about this trade is the excellent risk:reward ratio.  3 Drives patterns typically offer a better risk:reward ratio than any other pattern we look at.  We will now go over what to watch for assuming the pair continues rising to our entry at 1.4985. First, we need to watch how quickly C3 completes.  We are looking for the C3 leg to rise slowly and enter the trade near our hypothetical entry on the 15min Chart.  If there are long bars near the completion of the C3 leg, we will not take the trade.  If the pair comes within 10 pips of reaching our entry, does not enter, and reaches T1 before entering, the trade is invalid.  The trade is also invalid if the pair falls below 1.4875 before hitting our entry.

To recap, we will look to sell the GBP/USD at 1.4985 with our stop placed at 1.5010.  Our initial profit targets are 1.4935 (38.2% of CD) and 1.4894 (61.8% of CD).

Daily Chart - Long term downtrend with sell entry at previous highs.	15min Chart - Bearish 3 Drives Pattern; sell @ 1.4985.

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