The AUD/USD is at almost three year lows, with higher time frame charts paint a clear picture of a down trend. A three and a half big figure drop in a single session tends to attract traders’ attention. The challenge for traders is where to enter? Sometimes the simplest methods are the best.
The AUD/USD is my preferred short at the moment. A stronger USD could drive it – all though this is true of many pairs. The potential for a double bearish dynamic makes it attractive, with weakness in China and therefore commodity prices potentially adding to the USD induced negative momentum.
The four hour chart may provide an entry:
The method is known as a “hook” or “1,2,3” entry. A market trending downward makes a low (at 1) and bounces to a short term high (2). The down trend resumes, and a short position is entered as the market trades through the previous low at 1 (point 3 -not yet shown on chart).
This means selling at 0.9161 (ie just below 0.9163). Shorter term traders may place a stop just above the entry, on a view that a “hook” entry with good potential should see acceleration once 3 is hit. As a swing trade, my stop is above 2, around 0.9255. The target at 0.8815 comes from the weekly chart, and focuses on support established more than two years ago.
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