GBP/CHF To Face Test At 1.7069.

Last updated 10/26/2009 7:39 PM EST (GMT -5) 0 Comments - Add your comment

Forex Trading involves high risks, with the potential for substantial losses and is not suitable for all persons. Past performance is not necessarily indicative of future results.

Bradley W. Gareiss

Technical Analyst, GFT

The GBP/CHF has been in a downtrend for nearly 3 months. However, the pair has begun to move sideways and a moderate rise could lead to a bearish butterfly forming on the GBP/CHF 4hr Chart. Additionally, the trade would enter just above the 50% Fibonacci retracement of YZ on the Daily Chart. I really like butterfly patterns that consist of two 161.8% extensions because we know fairly quickly whether we are wrong or not. Assuming the trade completes as drawn, this is an above average setup.

We are looking to sell the GBP/CHF if it rises to 1.7069 (Point D). Point D is located at the convergence of the following levels:

We will now jump into possible red flags that could invalidate this trade. First, we need to watch how quickly CD completes. If the pair rises with long bars, don't take the trade. If the pair comes within 30 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 1.6370 before hitting our entry.

To recap, we will look to sell the GBP/CHF at 1.7069 with our stop placed at 1.7212. Our initial profit targets are 1.6854 (38.2% of CD) and 1.6676 (61.8% of CD).

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  • Daily Chart - Trade would enter at 50% of YZ.
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  • 4hr Chart - Bearish butterfly; sell at 1.7069.

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