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EUR/GBP Approaching Resistance at 0.8622

Last updated 8/10/2009 7:50 PM EST (GMT -5) 11 Comments

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Bradley W. Gareiss

Technical Analyst, GFT

The EUR/GBP has been in a downtrend for quite a while.  More recently, on the Daily Chart, a bearish trend line has emerged.  There is also a bearish Gartley forming on the 4hr Chart that is approaching completion.  The Gartley would complete near the bearish trend line assuming the pair continues to rise.  This is a relatively simple setup, but is still a highly probability trade.

We are looking to sell the EUR/GBP if it rises to 0.8622 (Point D).  Point D is located at the convergence of the following points:

This is a fairly straightforward trade so we will jump into possible red flags that could invalidate this trade.  We are unlikely to see long bars because the pattern is near completion.  However, if the pair falls from it's present point and rises back up, we still need to keep an eye out for long bars.  If the pair comes within 8 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 0.8554 before hitting our entry.

EUR/GBP

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  • Daily Chart - Trade would enter near bearish trend line.
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  • 4hr Chart - Bearish Gartley; sell at 0.8622.

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Comments (11)

Murat-B

August 11, 2009 at 03:56 AM ET

Well done. I'm definitely in.

DP

August 11, 2009 at 05:25 AM ET

Hi Brad,

I am sure you have mentioned this before but just to recap - when you refer to excessive volatility going into a potential trade setup, in particular "long candles", is there are certain number of pips that you use to determine whether candle lengths are excessive or is this simply relative to the previous average candle length for a certain period.

Thanks.

bgareiss

August 11, 2009 at 01:03 PM ET

I wrote this article a few months ago. It should clear up any questions you have. http://www.fx360.com/commentary/brad/1237/warning-signs-long-bars.aspx Brad

Mike

August 11, 2009 at 05:30 AM ET

what is your RSI setting 14 smoothed ?

bgareiss

August 11, 2009 at 01:06 PM ET

It is the standard 14 setting on Dealbook. RSI is by far the least important part of this analysis, and I would not read too much into this setting. It is simply a last confirmation to watch for. Brad

Jai Thomson

August 11, 2009 at 07:32 AM ET

I think we just missed this one...

bgareiss

August 11, 2009 at 01:06 PM ET

That is correct. It happens. Brad

sufibo

August 11, 2009 at 08:13 AM ET

Hey Brad, excellent trade opportunity eur/gbp, thanks! Sometimes i find that if there's strong resistance at point D, the candles don't quite get to the Fibonacci level and so i get in a few pips before it does. Of course with a tight stop loss. I also take out my profit just before it hits the 38.2% of CD as there have been several instances where the market reversed just a few pips short of 38.2% and having set a take profit and not being in the market at that particular time, i've had to take out a smaller/no profit.
Well, keep em coming. Thanks

bgareiss

August 11, 2009 at 01:09 PM ET

Keep in mind you occasionally will miss and entry or a profit target by a few pips no matter what. Beware of continually moving the entry closer and the profit targets closer because you can really hurt your risk reward. A few pips is fine depending on the magnitude of the trade, but be careful. Brad

fishmanszmit

August 11, 2009 at 01:55 PM ET

Hello Brad, So this trade is out of the picture now? Thanks for your great info!

bgareiss

August 11, 2009 at 02:00 PM ET

Yes. As the article says above, the trade is invalidated when the trade came within 8 pips of entering, did not enter, and dropped below T1. Brad

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