Markets continue to churn sideways, frustrating most investors.
Instead of allowing the market to dictate your emotions along with the herd, let it simply highlight the path of least resistance. That’s what I’m doing.
Today, I want to share with you two ways to trade the British pound – regardless of its next directional move…
The structural trend for the pound undoubtedly points sideways. A zoomed-out weekly chart makes that clear:
Yes, it has reclaimed a critical shelf of former lows. But it’s messy. And while I believe the pound and other currency pairs will begin to trend in the coming weeks and months, I have no idea what direction they will take.
So I’m prepared to trade the British pound in either direction.
I laid out the bullish case at the end of January. You can check it out here.
Today, I want to draw attention to those former lows at approximately 1.1950, outlining a bearish setup. As a breakdown below there invites further weakness.
Here are the levels to trade against on the daily chart:
If and when the pound undercuts the 1.1910 level (Jan. 5th close), I want to get short with a target at approximately 1.1415 (2020 lows).
I consider a valid breakdown based on a close below our risk level. If the market swings higher intraday, putting my position in the red – I’m out!
A decisive close below the Jan. pivot lows also raises the possibility of a head and shoulder failure. This interpretation accompanies a much lower profit target toward the head of the pattern (the lows from last fall).
Aiming for a downside objective coinciding with all-time lows seems aggressive. I prefer to focus on the 2020 lows. If it breaks below there, we can discuss the possibility of revisiting those extreme levels.
Who knows, it could return to 1.03. But I don’t want to get ahead of myself.
Remember, the market is a mess. Embrace it along with potential breakouts in either direction.
Last month, I prepared to buy a breakout in the GBP/USD. This month, I have an alert set for a breakdown.
It all comes back to listening to the market and remaining flexible. That’s the move!
