Trade Update: NZD/CAD Stops to .7625

Last updated 10/12/2009 3:36 PM EST (GMT -5) 0 Comments - Add your comment

FX360 Technical Analyst Staff

Technical Analyst, GFT

Our current NZD/CAD short position from .7793--as discussed in the September 28th technical feature, " NZD/CAD Collapse In Progress "--went off as expected as prices took an initial dip down to 8hr trendline/61.8% support hitting a low of .7695 before an effort to re-test the previous high at pattern completion near .7900 (point D on weekly). This takes us to late last week when prices fell off a cliff blowing past the initial profit target of .7695, and are now consolidating near 38.2% support of the weekly CD leg near .7568. 

Although there is evidence for further bearish momentum (meaning the final target of .7380 (T2) is technically valid), this initial level of longer-term support may result in more significant rally even if price do continue to trend down over the next couple weeks. At the moment, we are at a bit of a crossroads because if prices fall over the next few hours and make new lows (below .7650) then the odds of a potentially strong bearish break-out/continuation would increase. So what to do? Well, as always, it's a question of risk vs. reward. Taking profits now will eliminate the possibility of giving anything back (fear); however, we may also miss out on another dive (greed). 

Taking all factors into consideration, we've decided to tighten stops to .7625, which effectively locks in 168 pips of profit (doubling the amount of initial risk) and still leaves a little room for the possibility of another bearish break-out without giving too much back.

* Click here to see the "before" charts ... "after/current" charts below...

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