What I look for in an ideal trade setup
Dave Floyd is a professional FX and stock trader based in Bend, OR and the
President of Aspen Trading Group. Dave’s approach to FX combines technical
and fundamental analysis that results in trades that fall into the swing
trading time frame of several hours to several days. For a free trial to
Dave Floyd’s Daily Forex Alerts
Â
Â
Here Are Some Set-Ups & Observations
Â
Noting the
comments in italics below from yesterday’s column, we also note another twist
regarding AUD/USD after prices hit support at .7475 in the overnight session.
Â
This from
earlier this morning:
Â
About an hour ago we noted a short in AUD/USD – we wanted to
follow up with that to let you know why we posted this as a ‘Trade Idea’ versus
an outright ‘New Trade Alert’. The answer is: trading style.
If you are a trader who is a bit
more aggressive and is willing to sell technical levels regardless of current
momentum (see chart below) then the AUD/USD is a good idea – there is nor right
answer, it boils down to ones comfort level – ideally we look to have all the
pieces in place. In this instance the stochastic did not meet our criteria.
Â
Missed opportunity? Perhaps, it
depends on your style. For the record we did not take the trade – some of our
clients certainly did.
Â
AUD/USD
beginning to look tired as it battles the .7555 level – we are beginning to
sense that lower levels could be seen but for now that is just a ‘hunch’. Given
that AUD remains well bid on the crosses, particularly AUD/CAD we are not ready
to risk capital on this idea, but we will keep an eye on AUD/USD.
Â
Two
possible bearish signals:
Â
-Â Prices
(AUD/USD) break below trend-line support at .7521
-Â AUD/CAD break below .8507
Â
A move
above .8610 in AUD/CAD makes a weak AUD/USD far less likely as this would signal
a weekly reversal on this cross.
Â
USD/JPY
Â
Similar to the trade in AUD/USD (short) this morning – the 116.35
level may offer a good short entry with a tight stop-loss (15 pips).
Breakout trades in this market have
been hit and miss, and many traders may fade this push higher in USD/JPY –
prices could drift back towards 116.14 and perhaps lower.
Â
EUR/GBP
Â
Look for .6885-90 to provide some solid near-term resistance – we
will be looking to short this level and target .6850 – we will keep you posted.
Â
EUR/CHF Technical Outlook
EUR/CHF
has not followed through as much as we had thought. Yesterday we noted (see
italics below) that shorts on rallies into the 1.5625 level were reasonable and
that did occur. However, a sharp rise this morning calls into question lower
levels. We would view 1.5635 as the key level; a move/hourly close above that
level will negate any further declines for the time being.
For
the last couple of weeks we have been noting the lack of follow-through lower in
this cross despite all the geo-political tensions in the world. While it was a
delayed reaction by about 6-7 hours, it appears that EUR/CHF has responded to
the situation in the Gaza strip by breaking below the 1.5650 level.
This break of the recent range now
puts this cross squarely in play and we will be monitoring it for potential
short entries.
Updating our earlier posting on looking for short entry points on EUR/CHF we
will look to short into the 1.5625 level expecting it to hold and looking for
gradually lower prices towards 1.5575 & 1.5550
Caveat: while this trade has
technical merit – any improvements from a geo-political perspective may diminish
the bearish tone to this cross.
Receive a sampling of our
real-time FX research and trade alerts
FX Desktop Ticker
As always,
feel free to send me your comments and questions.
Â
Aspen Trading Group
Â