I’ve been kicking around the idea of a new idea for the blog: one trade I pick to start the week and see how it turns out by the end of the week. The trade of the week would assume a position was opened at the start of the trading week and closed at the end of the week.
I likely won’t post a trade every week, but I’ll post when I can. And I’ll start tracking the performance of these weekly picks too. So let’s start our first trade of the week with GBPUSD!
GBPUSD seems poised to fall
Last week I wrote about GBPUSD’s inability to get above the 50-day SMA and the technical failure we saw at that level. That said, the pair was still in flux and at an inflection point. It wasn’t clear it was ready to drop quite yet as it still had potential to push higher.
But things have changed a lot since then. Most telling is our 1-hour chart:
The 1-hour has flipped from bullish to bearish and is now in an ‘obvious downtrend’.
Related: The Ultimate Guide to Forex Trend Trading explains the definition of an obvious uptrend and many other trend types. I highly recommend reading it.
The 15-minute chart is also in an obvious downtrend:
And the daily is in an obvious downtrend:
Waiting on the 4-hour chart
In fact, the only timeframe that’s not currently in an obvious downtrend is the 4-hour chart:
That said, I’m pretty confident this will soon turn to an obvious downtrend. Look how the 50 and 100-bar SMA’s are starting to curl lower. Also note that price has fallen below the 200-bar SMA and closed below it for several bars now.
The channel support I drew has also been broken to the downside. And if you look hard enough you can kind of make out a head and shoulder pattern that’s broken lower.
In short, I expect continued downside pressure and I think this is a great trade of the week candidate.
How’d it perform?
We don’t yet know how this pick performed, but I will update this section with the week’s opening and closing price to get a total pip count of this trade idea. I’m already short GBPUSD and in the money a bit, but I think there’s plenty more room to roam to the downside.
GBPUSD showed surprising resilience this past week, and managed to hold on to gains after a surprise ~200 pip rally in under an hour. While the technical picture remains bearish, I’m avoiding the pair for now.
The end result had you opened a short position at the start of the week and close it at the end of the week would have been a lose of 129 pips. Not terrible, but definitely not great.