GBPUSD → Two Sell Signal Bars! Time to Short? Let's Answer.
GBPUSD gave us more upward price action to finish last week and thus far has failed to break the neckline. The Weekly chart shows two wicks over the 200EMA, but not a clean break. Should we short here?
How do we trade this? 🤔
We do not yet have the justification to short for several reasons. Most important, we're lacking a confirmation bar below the 200EMA. We have the two sell bars, but notice the last Daily candle from last week, it's a strong buy bar near a resistance line. A buy bar at a resistance line is not a buy signal because the context doesn't support a buy here. Buy bars this late in the game are often indicative of a potential reversal. The bulls tried to buy after a quick dip in price but failed to close above the 200EMA. This is a sign of potential weakness, key word: *potential*. That weakness needs to be confirmed with a strong bear bar closing on or near its low.
Such a dip will likely bring us to the 30EMA where I would expect some support. My preference would be to wait for that price action to either close below the 30EMA, or come back up to the Resistance Zone (as depicted) and fail again to confirm the short entry.
Until then, it's best to wait on the sidelines for the required price action.
💡 Trade Idea 💡
Short Entry: $2,225
🟥 Stop Loss: $2,510
✅ Take Profit: $1,940
⚖️ Risk/Reward Ratio: 1:1
🔑 Key Takeaways 🔑
1. Two Sell Signals at Resistance Zone
2. Failed to break 200EMA
3. Watch for Bear Close Below 200EMA and a re-test of Resistance Zone.
4. Look for Strong Bear Signal at Resistance to Short.
5. RSI near 58.00 above Moving Average, Contradicts Short Bias.
💰 Trading Tip 💰
A buy bar in isolation (bull candle with a large wick on the bottom) is a bullish bar. But bars in isolation are irrelevant when it comes to addressing a chart. Context is everything and when a buy bar appears near a Resistance Zone at what is possibly the end of a trend, it should not be considered a buy signal, but potentially a sign of weakness before the bears take over.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and comment if you found this analysis useful!
How do we trade this? 🤔
We do not yet have the justification to short for several reasons. Most important, we're lacking a confirmation bar below the 200EMA. We have the two sell bars, but notice the last Daily candle from last week, it's a strong buy bar near a resistance line. A buy bar at a resistance line is not a buy signal because the context doesn't support a buy here. Buy bars this late in the game are often indicative of a potential reversal. The bulls tried to buy after a quick dip in price but failed to close above the 200EMA. This is a sign of potential weakness, key word: *potential*. That weakness needs to be confirmed with a strong bear bar closing on or near its low.
Such a dip will likely bring us to the 30EMA where I would expect some support. My preference would be to wait for that price action to either close below the 30EMA, or come back up to the Resistance Zone (as depicted) and fail again to confirm the short entry.
Until then, it's best to wait on the sidelines for the required price action.
💡 Trade Idea 💡
Short Entry: $2,225
🟥 Stop Loss: $2,510
✅ Take Profit: $1,940
⚖️ Risk/Reward Ratio: 1:1
🔑 Key Takeaways 🔑
1. Two Sell Signals at Resistance Zone
2. Failed to break 200EMA
3. Watch for Bear Close Below 200EMA and a re-test of Resistance Zone.
4. Look for Strong Bear Signal at Resistance to Short.
5. RSI near 58.00 above Moving Average, Contradicts Short Bias.
💰 Trading Tip 💰
A buy bar in isolation (bull candle with a large wick on the bottom) is a bullish bar. But bars in isolation are irrelevant when it comes to addressing a chart. Context is everything and when a buy bar appears near a Resistance Zone at what is possibly the end of a trend, it should not be considered a buy signal, but potentially a sign of weakness before the bears take over.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and comment if you found this analysis useful!
Comment:
GBPUSD gave us more sideways price action in the Resistance Zone last week, holding its position above the Daily 30EMA. Per the initial analysis, we're still waiting for a sell signal here in the Resistance Zone and with the 30EMA just beneath the price, we need a break and a candle close below it on the Daily chart to justify a short.
Until we see that break below the Daily 30EMA or a close above the Resistance Zone, it's best to wait on the sidelines for more price action.
GBPUSD gave us more sideways price action in the Resistance Zone last week, holding its position above the Daily 30EMA. Per the initial analysis, we're still waiting for a sell signal here in the Resistance Zone and with the 30EMA just beneath the price, we need a break and a candle close below it on the Daily chart to justify a short.
Until we see that break below the Daily 30EMA or a close above the Resistance Zone, it's best to wait on the sidelines for more price action.
-Joe Dean
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Short Entry: 1.26230
🟥 Stop Loss: 1.28900
✅ Take Profit: 1.20900
⚖️ Risk/Reward Ratio: 1:2