Weekly chart of the British Pound index.I see two trend reversal signals:
1) a shooting star candlestick
2) the MACD lines crossing to the downside
This triggers my attention to a potential GBP downtrend starting in the next few weeks.
What can we see on the daily chart?
1) we are in a sideways market since early June
2) there is a bearish divergence going on, meaning that the GBP index is staying around the same price level whereas the MACD lines are showing a negative slope: a powerful bearish signal!
3) we experienced the contrary from December 2008 till April 2009: a bullish divergence, which resulted thereafter in an uptrend of the GBP index from 1.44 to 1.70
Now what? If the GBP index goes below 1.60, I will take a short position. This scenario would become obsolete if GBP index goes above 1.70; in which case, I would become bullish again.
Dear Trader Blastradius
ReplyDeleteComplementing your analysis, there is also an head and shoulder formation forming in the pair which neckline was recently touched @ 1,60 USD. If the price drops significantly below this neckline, this formation will be completed ultimately, indicating a new downtrend for the GBP. By the way, since stocks, commodities and bonds recently reached tipping points as well, I assume an high grade of probability and a sustainable impact on the pair.
Cheers
Hi NR,
ReplyDeleteyes you're right: there is indeed a head and shoulders formation in the GBP index (same chart pattern for GBP/USD). This reinforces the other signals I mentioned: MACD bearish divergence. GBP is closely linked to the financial sector. If bank stocks fall, GBP tends to fall as well.