This is a shared post from Casey Stubbs at www.Winnersedgetrading.com
The EUR/USD has been in a relatively strong uptrend since mid-November of 2015.
When the US Dollar began to weaken, everyone started talking about just how far it would go–Just how high the EUR/USD might go.
And while there is still plenty of room for the EUR/USD uptrend if that’s what the market throws at us, I wanted to hone in on a purely technicaly opportunity around the corner.
Today, March 30th brought prices into the 1.3350 level where significant resistance is present:
It’s obvious what happened the last time prices reached this range. I am not necessarily expecting a 500 pip drop like we saw at the beginning of last month, but I do have a hard time believing we won’t see any respect of this level.
One resistance level, even if it is a triple top on a Daily chart, is not really enough to get me excited to make a trade…
It’s the fact that even heavier resistance lies ahead that makes me very interested in building a short position on the EUR/USD starting today.
Take a look at this Weekly Chart:
About 150 pips above the current level is a HUGE weekly resistance zone.
But wait, there’s more!
If you draw a fib using the most recent leg of this Bearish trend, check out where the 50% level is:
Between the current daily triple top, huge weekly resistance zone and the overlapping Fibo level, I think it’s almost a guarantee that we get some rejection of the EURUSD over the next 200 pips (if it even follows through at all before a dip).
I am shorting EURUSD right now at 1.1348; and if the EUR/USD is able to work through the daily tripe top without a pullback, I will short again at the 50 Fibo level @1.5000 which is the same price as the Weekly resistance zone.
The beauty is that even if the EURUSD continues its uptrend, all I need it to do is respect one of these key areas and bounce downward in order to make some profit on this trade setup.
If tomorrow is a bearish day and it does NOT continue through the 1.1350 level, I will manage the trade for as much profit as possible and cancel my next position at 1.5000
If it does bounce all the way to 1.5000 without respecting the 1.1350 level, I will add my next position and wait to see if comes down to retest the daily triple top which is extremely common after a key break.
So, even if it blows through my first position, if it comes back to test the level again, I will net 150 pips on my 2nd position and get out at a break-even on the original position.
Both stop losses will be at 1.5653
Overall, I find this to be a very high probability setup with not just one, but two key areas that are very likely to drive price to the downside to some extent. Though it may not be the 500 pips we saw 2 months ago or even the 200 pip rejection from two weeks ago, I believe there’s money to be made here.