Being a target trader, I am naturally looking for points where we believe the market has reached a major support/resistance point and has just struck a D extension on the fib scale. In my opinion, trading back from the D — a “sweet spot” trade as the FX Chief dubs them, offers excellent risk versus reward and in general a relatively reasonable stop. However, we don’t see these exact conditions the way we want all the time.
If you are reading this you are looking to become a client with MTI or already are a client with MTI. This is where account reps like myself come in. Each week as an added benefit I try to point these out to you as often as I can. All of the MTI staff has particular skill sets and charts — and news in this market happens to be one of my strong points, so this is how I pitch in.
Let’s take a look and see what I found this week:
Now, most of the Forex market is looking to this pair right now. Brexit is still an active force in this market and in my opinion, seems to be holding up the market in general. This has caused shorter trading ranges when we expected larger ones and has also caused most of the market to slow. However, even considering all of this, I believe this pair is going to offer us a 210 pip short over the next few days. This is a classic “negative space” trade created by an over-run market. We are just about to hit a D extension and it looks like we are starting to get divergence between the momentum and Stochastic at the bottom of the screen indicating a readiness to sell off.
Let’s look at the entry plan, (I believe should make good sense to most of you) where I will be trying to scale in on this position to make this trade worth more of my time — since it’s not the largest (210 pips is not huge but respectable).
At this point in time I have pending market sells and sell stops ready for when this market is on the right side of that trend line in black. I will need price below my first proposed point of entry, selling in at no less than 144.879 — but only after this market has struck the D extension at 145.609. I then need to get a stop behind me above the old D by about 25 pips. If we do this, we are risking 79 pips on this trade entry to take the short all the way to the weekly target at 142.870. This would be a 210 pips reward. However, I see common resistance that will slow the market on its way that will no doubt be possible areas we can scale in on this trade to make it worth more of our hard spent time. I have pending sell stops with the same stop as the original entry and the same exit of 142.870. These additional 2 orders will stack an additional 150 pips to this trade if we are right. If I am wrong and the market does not go that deep, the order cost us very little in time to set up — so no skin off our backs! Again I do see the market going to the monthly rather early in this pair, but that is just my opinion.
Good luck, and I hope this helps you make some money this week. Shoot for the pips and keep your equity management in check!
P.S. As I do with my students, I usually post a follow-up to my last idea. EUR/JPY was wonderful this week. Check the blog post screen shot from the 19th last month (below) and then go check a recent chart. TARGET TRADING WORKS!