EURCAD - My friend it is better for long, than for short...
... This was my answer to my very good friend, who called me last friday to ask my technical view on EURCAD. He had the idea to go short, mainly based on changes in long term fundamental differences.
This post could be a trade idea as well, but maybe it is a bit too late to go long now. The reason I still post it is to show you what are the problems with the odds now.
First of all let me call your attention to one thing. My friend (who is by the way an excellent risk taker and has been a very succesful trader for very long time now) may be right regarding all the fundamental motives he has, especially in the long run. I can say, I agree with him. I was also thinking about these fundamentals a bit when I last opened a short trade in EURCAD (please see the link below regarding that idea). But should I go short now based on these long term fundamental presumptions? And do you think I opened and closed my last short based any bit on fundamental presumptions? I guess you know the answer, which is NO, for both questions. Why? Simply because I am a technical trader, not a fundamental. And even though I simply can't resist looking at fundamentals at least a bit, the truth is we should all completely forget about it when doing technical analyses and technical trading!
But let's see the tech arguments:
Yes, I see it may develope to a Head and Shoulders, and yes, I still think there is a chance that 1,5600 could become a longer term top, and price might not be able to break above it. But the setup for short was/is basically not there at all now. Slow Stoch and MACD did a Bullish cross almost same time on the daily chart. Price is in the Kumo, which means at least it is consolidating, but looking down to the 4 Hrs chart, it may happen that breaks out on the top side, as on that lower time frame the setup is medium bullish already. Even if someone loves top hunting, the odds are not good now. There is no problem with top hunting, not even then when you still don't have a clear sell setup, but at least you must have some reasonable arguments on the side, plus you must not go into the trade with full trade unit (full size), to avoid a too painful stop due to be too early on the entry.
Even I did some kind of "top hunting" during my last call for short. But remember (or read it again please), then we had MACD bearish cross looming, with its negative divergence, we had the Slow Stoch bearish signal and we had a bearish wedge. I still did not have a clean sell setup on the 4 Hrs time frame, but I had a lower high there as well. All in all the odds supported an early short then, which I opened with 1/3 trade unit, and sized up to full later, when the 4 Hrs chart delivered the sell signals too.
I do not say it can not come down on Monday from 1,52 to 1,51 again. Just putting it all together, it is not the best risk-reward strategy to short EURCAD now. If we strictly look at it, we should rather try to go long at some point, but to be honest, I just leave it alone, as I see better risk/reward trades elsewhere, e.g. in USD crosses.
You can not ride all the horses all the time!
This post could be a trade idea as well, but maybe it is a bit too late to go long now. The reason I still post it is to show you what are the problems with the odds now.
First of all let me call your attention to one thing. My friend (who is by the way an excellent risk taker and has been a very succesful trader for very long time now) may be right regarding all the fundamental motives he has, especially in the long run. I can say, I agree with him. I was also thinking about these fundamentals a bit when I last opened a short trade in EURCAD (please see the link below regarding that idea). But should I go short now based on these long term fundamental presumptions? And do you think I opened and closed my last short based any bit on fundamental presumptions? I guess you know the answer, which is NO, for both questions. Why? Simply because I am a technical trader, not a fundamental. And even though I simply can't resist looking at fundamentals at least a bit, the truth is we should all completely forget about it when doing technical analyses and technical trading!
But let's see the tech arguments:
Yes, I see it may develope to a Head and Shoulders, and yes, I still think there is a chance that 1,5600 could become a longer term top, and price might not be able to break above it. But the setup for short was/is basically not there at all now. Slow Stoch and MACD did a Bullish cross almost same time on the daily chart. Price is in the Kumo, which means at least it is consolidating, but looking down to the 4 Hrs chart, it may happen that breaks out on the top side, as on that lower time frame the setup is medium bullish already. Even if someone loves top hunting, the odds are not good now. There is no problem with top hunting, not even then when you still don't have a clear sell setup, but at least you must have some reasonable arguments on the side, plus you must not go into the trade with full trade unit (full size), to avoid a too painful stop due to be too early on the entry.
Even I did some kind of "top hunting" during my last call for short. But remember (or read it again please), then we had MACD bearish cross looming, with its negative divergence, we had the Slow Stoch bearish signal and we had a bearish wedge. I still did not have a clean sell setup on the 4 Hrs time frame, but I had a lower high there as well. All in all the odds supported an early short then, which I opened with 1/3 trade unit, and sized up to full later, when the 4 Hrs chart delivered the sell signals too.
I do not say it can not come down on Monday from 1,52 to 1,51 again. Just putting it all together, it is not the best risk-reward strategy to short EURCAD now. If we strictly look at it, we should rather try to go long at some point, but to be honest, I just leave it alone, as I see better risk/reward trades elsewhere, e.g. in USD crosses.
You can not ride all the horses all the time!
