Lately I've been posting a lot about options and trading volatility as it's own asset class. Today, I'm going to get the cable turned back on.
The US dollar has been on a mammoth run against nearly every other asset that it's paired against, and some have done better than others. On a relative basis the British Pound has held up pretty good. When I was going through my charts today looking for setups, I happened upon an idea.
What we have here is a chart of GBP/USD going back about 18 months. After the last two days price action I decided to take a look back. In July of 2013, Cable did a double bounce off of support at 1.48. I don't often take counter trend trades, but the 1.48 level seemed like an important enough level for me that I thought I would take this trade. In addition, the BOE held rates at .5% instead of cutting.
My thesis is that the 1.48 to 1.50 level will create sufficient support to cause a bounce created by capitulation selling and retest the 1.54/1.55 level.
I'm long GBP/USD @ 1.51. My stop is 1.48, the 18 month low off of which there was a double bounce. My limit is 1.55. I will move the stop to break even at 1.53, and trail at 200 pips.
As always, follow the Small Time Trader blog should you so choose.
I will update this trade here and on Twitter @B50cal1978
Thanks to my Google+ circles for my first 100 views in a day post.
Good luck trading!
STT
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