The pound has been pounded the past couple weeks as a result of Brexit but I have been watching buy signals and confirmations over the past week. I exercised patience with these signals since I wanted the dust to settle a bit on the whole Brexit thing first before I try to get long a pound pair. Wave structure shows a very mature Intermediate wave (3) unfolding. You can see that Minor wave 3 contained the sharp selloff after the Brexit vote, and although it has continued lower the following week or so, it has done so in a choppy and weak manner. This is indicative of a weakening trend, and a 5th wave nearing completion. I also anticipate that because of this structure, when the pound reverses higher, it will be a very fast and sharp affair.
According to FXCM's sentiment index, the retail side of the trade is heavily long the pound in general. So that does not support an attempt on my part to get long the GBPUSD. Instead, I will look to the pound crosses with buy signals confirmed. I see that in GBPCAD and GBPNZD. Although retail sentiment is firmly bullish on the pound, it is extremely bearish on the NZDUSD. As a nice contrarian indicator, this means the NZDUSD will likely continue higher. So these two sentiment indications should cancel each other out on the cross GBPNZD. So I can now just focus on my custom indicators and the confirmed buy signal which is in place right now. I want to put in a 1/3 long position on a big trade. I don't want a stop loss in place because I want the trade to work, but I will put in a catastrophic stop loss in at 1.7200 and will quickly tighten that significantly once the trade moves in my favor. Here's the setup:
Long GBPNZD at market (currently 1.8135)
Profit target is 1.8900
Catastrophic stop loss (optional) 1.7200
PLEASE NOTE: THIS IS AN ELLIOTT WAVE BLOG EXPRESSING AN OPINION AND IN NO WAY GUARANTEES OR IMPLIES ANY PROFIT OR GAIN. TRADE AT YOUR OWN RISK.
1 comment:
I see 1.74544 before any correction. GBP/USD : bear flag can be observed on H1 chart. We might see bottom today maybe NFP can create bottom and show pull back. Let us hope for the best.
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