This week I was working with clients on the phone talking about the EURO zone and its potential for a sell-off over the next few weeks — as well as the NZD market’s potential for volatility at the same time. As a trader, I really like the EUR/USD and its short side potential now that I have seen it stall out at a natural point of resistance in any chart (1.127 on the fib scale) several times.
In addition, the market has just u-turned and the major down A/B’s .860 level. This will offer us a nice manageable stop loss location and a large reward making this, in my opinion, a no-brainer trade. Let’s look at the lay of the land from a bit of a distance and see what we have:
As you can see, the major market potential (capital A/B) is a down fib. That makes the overall bias of this market toward the south. In addition, the sub a/b has just bounced off the 1.127 again and this screams “I am ready to sell off!” and we have not really pulled back on this current up sub a/b boundary yet. This leads me to believe we want a sell-off here, so now we need to find a reason to trade this with great risk versus reward. Let’s see if we can find it in the missed targets from MTI’s Target Trading 2.0 Course:
We do have a brand new monthly target that is about 100 pips from the current market price. This is where I believe the market will go most immediately if the counter trend line in black does get broken — but, we don’t just start selling because a CTRL gets broken. We need an additional move to the north creating a “sell high” price (basic price action mechanics) before we start selling and set up our order. The missed monthly target from last month is 400 pips away from our current market price — which is another point of interest for me here but is much further in the future. Let’s see what an entry plan might look like here:
I would be looking to exit at the new monthly target as my most immediate exit but there is a better and more likely target on this chart — the un-hit daily target from Monday this week (the market was closed here in the USA). This is roughly 155 pips from current market and is my true exit plan for the week. Because of this, I am looking to enter at 1.11997 after the CTRL is broken and a “sell high” price is made by testing the back side of the CTRL. Then I am placing my stop at 1.13085 and looking to exit at 1.10520.