Top Trade Idea For December 15th, 2014 – USD/CHF
After three successful USD/NOK (Norwegian krone) long trades in recent weeks, it’s time to look elsewhere. In so doing, we’re not suggesting the oil price fall has ended. However, we have noticed price moving and closing below a four month uptrend line that may be worth some consideration. We’re talking about “the franc” (the Swiss franc). Given the demise of the franc in France , Belgium and Luxembourg (over ten years ago), it’s hoped that old fashioned references to “swissie” will also be phased out.
This twelve-hourly USD/CHF chart shows the price action from August when price was around 0.90. From mid-August, the subsequent price rise towards the early December high of 0.9817 is supported by a blue uptrend line. During that time, there was one push below the uptrend line in mid November (marked with a brown star). That was FOMC Wednesday which saw price initially spike lower but subsequently close above the trend line near the high of the bar. This is the reason we’ve drawn the trend line this way instead of through the low of that bar.
Since the 0.9817 high, price has started heading lower. Importantly, it has recently closed a number of times below this trend line. This may be an early sign of lower prices to come. If so, it won’t be unusual to see price move back towards the trend line and then use the trend line as resistance (instead of support) and a springboard to price moving further lower. The pink lines on the chart illustrate this possibility.
Therefore, we’re looking to sell USD/CHF at or above 0.9725 (weekly close was 0.9643) which is nearer the underside of the trend line. Our stop will be 0.9825 (just above the current high). We’ll set two take profit targets at 0.9595 and 0.9475 in case any move lower is purely corrective and subsequently moves above 0.9817. This setup looks to risk a maximum of 100 pips to make at least 130 pips and 250 pips for the second. If both targets are reached, the risk/reward will be 1.90.
Short Setup for USD/CHF
- Trade: Sell at (or above) 0.9725.
- Stop Loss: Place the stop at 0.9825.
- Take Profit: The two ‘take profit’ levels are 0.9595 and 0.9475.
- Trade Management: If price reaches 0.9560 without triggering the entry, cancel all orders. If orders are triggered and price reaches 0.9595, lower stop to entry 0.9725.
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.