EUR/USD: False Break City
PipHut | Jan 16, 2013 05:11AM ET
Our short was triggered on the 1.3321 support break yesterday, and then closed out at 1.3347 on the false break alert for a 26 pip loss. There was a second support break later in the day but we passed on that, as we indicated in yesterday’s setup when we said “we will take a max of two trades, one in each direction.” Since it was the second short signal we passed on it.
Though we say it is a disappointing loss we can never stay mad at our false break alert system for too long – 95% of the time it keeps our losses very, very small (single digits), which greatly tilts the risk/reward ratio in our favor despite starting with just a 80 TP and 50 SL most of the time.
The pair did continue to drop after the second support break and has dropped over 60 pips since then, creating a decent falling resistance in the meantime. The pair is overbought on the long-term charts, but the combination of the falling resistance and the potential for a double-top formation or another stab upward will keep us looking to get long on a resistance break.
Trading Idea: Long on a resistance break with a TP of 80 and a SL of 50.
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