Friday, October 16, 2009
GBP/USD Mixed Signals Now, I'm Standing Aside
After the GBP/USD thrusted from a small triangle and reversed right into the apex of the triangle for a textbook EWP move, I am now flat the pair.
The key now is to look at the GBP/USD bigger picture to know what it's going to do next. Is the 5 wave rally part of A wave? Is it a C wave of a flat correction? Is it the start of a larger 1-3-5 rally?
Attached is an 8hr GBP/USD chart. It shows that it's at levels that can end the entire rally and lead to the next leg down, i.e. the RSI has reached a level and reversed that has previously led to tops and reversals (see blue circles on RSI) and the pair is finding resistance right at the 61% fibo level (see blue circle on price candles). However, the entire rally was in 5 waves, which tells us that unless it's a C wave, then the trend is now up. I cannot count it as a C wave, so I have to assume it's part of a larger correction, probably an A wave, of an A-B-C rally. So I'm planning on a B wave to slowly and choppily grind lower before another power C wave occurs which should cap the entire rally move as long as it stays beneath 1.6744.
I rarely trade B waves as they're so difficult to trade, and there's conflicting signals is this pair, so I'm currently flat until structure unfolds some more.