*An update on 2 trades I have entered using trendline break strategies*
Welcome back to the blog and welcome back to a rare weekend post! I am going to talk you through two intraday trade positions that I am currently holding which were both entered using trend reversal, trendline break analysis. I will show you my pre-trade analysis, current trade entries and also future price predictions for both instruments.
If you read my previous blog post you will know I was looking at the EURUSD FX currency pair and the FTSE 100 stock index as potential short trade opportunities. Since then I have entered trades on both of these instruments and I am going to show you why.
Let’s get right in to it and look at my current trade positions and why I entered them when I did.
EURUSD short trade @ 1.13250
There were two key points to my pre-trade analysis for this short trade. The first is the multiple bearish daily candle closures leading up to the entry as this shows there is higher timeframe resistance forming and that buyer momentum is slowing. The second is the break of the bullish trendline and subsequent retest and then sell-off.
My short trade entry @ 1.13250 was on the close of a bearish wick rejection candle of the trendline that was broken along with the 1hr 50 EMA which lead to a lower high being made. Lower highs and lower lows then continued to form the current bearish trend. Later on in this blog you will see a larger view of the EURUSD chart with the full bullish trendline drawn on.
FTSE 100 short trade @ 6300.00
The lower timeframe (1 hour) was and is quite messy on the FTSE100 index. It is most likely caused by the current influx of fundamentals and news pushing and pulling price in multiple directions but with no real substance. This is why I am using the 4hr chart for my trade entry and management.
Much like the EURUSD trade, the bullish trend was deemed reversed once the trendline was broken last week and price began forming the lower high whilst retesting the trendline. This “trifecta” or cluster of confluences is what you should all try and look for when finding trade entries. Simple multiple points of analysis that all help to create a directional bias.
I entered short upon the multiple rejections of the 0.618 fibonacci retracement level and 6300.00 resistance zone. Ideally this lower high will form and price will now go on to make a new lower low. I am using the Fibonacci extension levels for predicting where this next low might be. Later on in this blog you will see some higher timeframe analysis of this stock index which I am planning on using for trade management.
If you are still unsure on how to draw a simple trendline or struggle with finding trend reversal trades then practice is the key. Go look at past price action and find trade examples where your analysis would have worked and where it wouldn’t have.
I have covered this topic multiple times in previous blogs. If you click on the link below you will see a blog post from October last year and there are multiple trendline break trades for you to help with your own learning.
As always, remember to keep it simple and build up your analysis from the ground up. Find an instrument that is trending, look at the higher timeframes for support/resistance, apply your trendline and go from there.
Future price predictions.
The two charts below show the higher timeframe analysis for both the EURUSD FX currency pair and the FTSE100 index. I have marked on my longer term profit targets for each trade and where I will look to lock in profit and remove exposure.
Since the bullish trendline was broken and retested, price has begin to establish a nice downtrend. This is easily identified with the lower highs and lower lows and price is now residing below both the 50EMA and 200EMA on the 1 hour timeframe.
The 2 main price levels of interest to me are 1.10 and 1.08. These are both previous intraday support and resistance zones that produced multiple price reactions in the past and I believe they will likely do so again in the future. I will use these zones to take profits and remove exposure from the trade positions.
As the bearish trend continues to establish itself, there is potential to add to short positions on the FX currency pair. As always I will look to buy low and sell high so I will be looking to enter on the pullbacks and lower highs.
This FTSE short trade is a lot simpler than the EURUSD and ideally I will take most of my profits at around the 5750/5800 zone. This would be a lower low on the new intraday trend that is trying to form on this timeframe and the -0.27 fib extension level and a previous support zone also resides there.
Much like the longer term outlook on EURUSD, if this bearish trend does become more established then I see no reason why one wouldn’t add to short positions on the next lower high if it occurs. It may seem farfetched but there is potential to trade this index all the way back down to the yearly lows and support zone at 4800.
IMPORTANT! These charts are not intended to be “trade signals” or financial advise. It is simply my opinion on how I think these two instruments will move over the next few days and weeks.
Upcoming financial market fundamentals.
The calendar shown above is the next 7 days of economic data that is considered to be high impact. As you can see, there are a number of announcements that might effect trade positions on EURUSD and the FTSE100 index.
U.S. manufacturing PMI will usually have an effect on the value of the U.S. dollar although it is likely priced in right now considering the recent dollar strength in the past few days. I believe traders are predicting positive manufacturing data in conjunction with the recent positive retail data seen last week.
The ECB (European central bank) monetary policy meeting will be a major mover of euro markets including the Euro currency and stocks. Keep an eye out for that one and make sure your exposure is in check prior to the event.
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