The pound has been trading within a tight 80 pip range in the last couple of days starting around the 17th of December. We did see one break out to the upside on the 24th, however it got beaten back down into the range within a few hours. Looking at the bigger picture this break out looks like a nice head of a head and shoulders chart pattern. We have just completed our second shoulder which leads me to an anticipated downward breakdown in the next hours.
Looking at the M15 we have just broken a strong support level which then got confirmed as resistance. We have just touched this level again and this is where I entered a short trade. Conservative TPs are at the next support level. However, since I am anticipating for the head and shoulders pattern to be accepted by the market I will take my TP down at my 1 to 1.5 risk reward ratio, which matches up with my trading plan. Stops are placed one ATR range above the previous highs.
I assume we will quite likely see a little bit of a bounce play at the market support area. Conservative traders could take out the full position at this level or take out half of the position and pull stops to breakeven and let the other half run.
It would also be possible to wait for a break of the neckline and enter the market as soon as we see a pullback to the broken support level. If this happens I might add to my position.
Leave me your feedback. What do you think are we going to see in this pair?
Overall record: 0/2 -- -51 pips