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Three Compelling Reasons

Three Compelling Reasons

Richard Krivo, Trading Instructor

Instructor's Response:

 
Good identification of RSI divergence and chart recognition in general...nice work.
 
At the point you mention shorting the pair, the RSI closed below 70. Based on the RSI alone, this gives a strong signal to sell the pair.  Taking into account the divergence that you mention, the RSI closing below 70, combined with the bearish engulfing candle, we have three very compelling reasons to sell the pair at the point on the chart that you mention.
 
A suggestion:  Given that this is a Daily chart of the GBPUSD, one of the more volatile pairs, a more prudent stop could be placed above the wick of the highest price indicated on this chart...see the chart below for a visual.
 
chart 4 14 10

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