Timing has a lot to do with the outcome of fighting a trend.

And last week was not a very opportune time to short risk assets or risk associated currency pairs. Let’s take a look at the euro. Wow, I was right on target last week in calling for volatile and directional price movements. A 250 pip rally should not be ignored.

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The bigger issue is: are we in an uptrend or a down trend? The short answer is that I don’t know. The longer answer is I don’t care. I can make pretty solid technical and fundamental cases for why I think things should go up or down. But, if you trade off of levels, the only arguments that matter are entry, risk, and money management.

BE CAREFUL FIGHTING THE TREND
That being said, I think last week was the definition of a parabolic move in the euro. So, don’t buy the top, but be careful fighting the trend. We stopped just above the .618 retracement of the short channel from 1.31 to 1.26. This level coincides with a weekly line I’ve had drawn for quite some time, but these larger levels are a little more subjective.

So what? The last week of the month is traditionally pretty slow. I would be hesitant in calling this a top, but I don’t see anything on the calendar that would propel us much higher. Once a graph moves as it did last week, it often likes to take a breather. Breathers often manifest as counter trend consolidation patterns.

I’m still not sure which direction the trend is going on the euro, but I would be comfortable looking for intraday shorts down to retracements of last week’s spike higher. But, if you like this trade, make sure your risk is in check. In the near term, this is a counter trend trade. Buying dips down to those levels may be healthier.

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