Top Trade Idea For December 8th, 2014 – USD/NOK
Last week’s USD/NOK long trade idea succeeded (see http://www.forexnews.com/blog/2014/12/01/top-trade-idea-december-1st-2014-usdnok) making it the second time in a recent weeks we’d successfully traded USD/NOK (and as suggested last week, it would be quicker to complete than the first USD/NOK setup). The oil price fall remains the key topic of conversation so given its strong inverse correlation to USD/NOK, we’re going to recommend a third USD/NOK trade idea in recent weeks.
Our USD/NOK trade last week recommended waiting for a pullback to 6.95 before buying, a thousand NOK pips below the recent high. While such a large pullback may have seemed unlikely, it did eventually fall and the actual low was 6.9160, well above our stop of 6.86. Our target to a new high was reached with a reasonable risk/reward of 1.22. It may have also been surprising the pullback from 7.0589 to 6.9160 looked like one corrective wave (when Elliott wave counts expect corrections to be a three wave move). However last week’s wave count showed that the first two corrective legs were part of the move to a new high at 7.0589 which is why only one leg below 7.0589 was expected before moving to a new high.
This week’s chart looks at a little more data to highlight a different aspect about this USD/NOK move higher. Today’s eight-hour chart starts from early September (and has no Elliott wave labels). The actual price action is shown in black while the pink lines are our expectation for the next two moves.
The chart shows the price action higher (from around 6.20) towards last week’s high near 7.18 is confined within parallel lines. The channel bottom joins the lows at 6.4069 and 6.7160 and the channel high ran through the earlier high at 6.9341. It should therefore be no surprise that last week’s strong rise ran into resistance when it reached the channel high at 7.1802.
We’re now looking for a pullback below 7.1802 which we’ll use as an opportunity for an entry. We’re expecting this pullback to end between 7.0589 and 6.9160 based on an Elliott wave guideline, so our entry will be slightly above this range. We still feel there’s at least one more move higher so we’re prepared to buy the pullback as we can’t count five completed waves above 6.9160.
Therefore, we’re looking to buy USD/NOK at or below 7.0700. Our stop will be 6.9750 and our target will be 7.1850. This setup is similar to last week’s in that we’re looking to risk 950 NOK pips (about 130 USD pips) to make 1150 pips with a reasonable risk/reward of 1.21.
Long Setup for USD/NOK
- Trade: Buy at (or below) 7.0700.
- Stop Loss: Place the stop at 6.9750.
- Take Profit: The ‘take profit’ level is 7.1850.
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.