Top Trade Idea For November 24th, 2014 – GBP/NZD
Since late September, GBP/NZD (‘the pound’ against the New Zealand dollar) has fallen 1400 pips. We feel that this trend will continue and will discuss a trade for expected move lower. The recent move higher provides an opportunity to trade it short.
This eight-hour GBP/NZD chart starts at the early November 2014 high of 2.0812 and ends with the recent move higher from 1.9617. Importantly, the chart also includes an Elliott wave count from the 2.0812 high.
Having mentioned we’re in a downtrend (especially when viewed on a “2-day” chart), price action in the direction of the trend generally occurs in five waves, and the chart shows an initial five black circle waves lower from the 2.0812 high to the 1.9617 low. Within that move, the chart shows the five smaller blue waves within wave ‘black circle three’.
Price action against the trend (i.e. higher) occurs in three waves, and so far, we’ve seen a possible two wave countertrend move higher from the 1.9617 low marked as waves black circle ‘a’ and ‘b’. If the b-wave is complete, we’d expect the third leg of this correction to find resistance between 2.0100-2.0225. If the b-wave is still in progress, we’d expect the third leg to find resistance above the previously nominated zone.
Therefore, we’re looking to sell GBP/NZD at 2.0090 or higher. Our stop will be at 2.0690 (above the 78.6% retracement of the move between 2.0812-1.9617). Our single ‘take profit’ target for this trade is 1.9290. Therefore we’re looking to risk 600 NZD pips to make 800 pips. The risk/reward for this setup is a reasonable 1.33.
Short Setup for GBP/NZD
- Trade: Sell at (or above) 2.0090.
- Stop Loss: Place the stop at 2.0690.
- Take Profit: The single ‘take profit’ is 1.9290.
- Trade Management: If price reaches the first target of 1.9490 without triggering the entry, cancel all orders. Further, if the entry is triggered and price reaches 1.9490, lower the stop to 2.0090
About Todd Gordon Founder – TradingAnalysis.com
Todd Gordon is the Founder of TradingAnalysis.com, and a cast member of CNBC’s Money in Motion. TradingAnalysis.com provides actionable market analysis and clear trading strategies in the currency, commodity, and equity markets for the amateur and professional trader alike. Most recently, Todd served as managing partner for 2 ½ years at Aspen Trading Group , a trading and research company focused in the foreign exchange markets. Prior to that he served a 6 year stint as the Sr. Technical Strategist for FOREX.com, while at the same time trading for GAIN Capital Asset Management, the parent company of FOREX.com. The fund specialized in trading in the G-10 currency markets and managed over $25 million.
Valued as one of the most respected Elliott Wave practitioners in the industry, his international following comes from his ability to translate the wave theory into clear and concise trade strategies. His highly enthusiastic, easy-to-understand presentation style and TV presence has sent him to regions including the Middle East, Europe, Asia, Australia, and the US, and appeared on CNBC, Bloomberg, Sky News, BNN, and Fox news . His research clients value his clear and concise analysis as he preaches, and demonstrates, discipline by consistently applying the written analysis to trading in his personal accounts. Todd lives by the mantra Plan Your Trade, Trade Your Plan.