Many of the financial markets had a quiet session Friday, namely stock index futures and many of the currencies There were lots of narrow range days and range contraction’ in addition, many currencies also had doji bars Friday. This meant we should be looking for breakout trades and directional moves in these markets today. The British Pound was one of such markets, let’s see what my Trade or Fade service did with Pound futures today.
Trade or Fade labeled today a breakout day for the Pound-it was the narrowest session of the previous four, it was a doji, and Friday’s range was 72% of Thursday’s range. The Trade or Fade report sent out last night, tells us the status of the market criteria used, then calculates proprietary support and resistance levels centered around the session open. The “Trade” designation tells us to be looking for a breakout move-to buy a breakout over first resistance at R-1, or sell a break below first support at S-1.
Looking at the chart below, note the market’s behavior after it trades through R-1. It dips back, then rallies back through R-1 and continues its rally the second time through. I have found that the “second pass” through a support or resistance point is often a good trade signal to take, so if you miss the first breakout signal you should be alert for a second signal in the same market. In this case, after the second pass through R-1 the Pound rallied to the first profit target at R-2 of 14197 in about two hours, for a move of about $737.50. After hitting the profit target, it had a “second pass’ set up through R-2, but I wouldn’t have taken this signal, as I generally view R-2 as a place to take profits, not to initiate new breakout trades.
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