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EURCAD Tests 18 Month Support Line

EURCAD Tests 18 Month Support Line

2011-12-22 15:44:00
Jeremy Wagner, CEWA-M, Senior Strategist

EURCAD Tests 18 Month Support Line

Last week, the EURCAD offered a selling opportunity using simple trend line resistance. ( “Trend Line Resistance Offers EURCAD Short Opportunity” ) Prices are now approaching a daily trend line support zone that has been in place since June 2010. Those traders who are sellers of the pair will want to adjust their risk in the trade in anticipation of a bounce.

EURCAD Tests 18 Month Support Line

As we can see from the chart above, an upward sloping trend line in place since June 2010 crosses today near 1.3300. This price zone is likely to produce some type of a bounce to the upside. We won’t know the length of the jump up (if it occurs) until after the move has completed. There are a couple of different ways a trader who is short the EURCAD can manage this trade in the meantime.

  1. The trader can be happy with the current trade and close it out for a profit just above the 1.3300 level (no need to be greedy on a 200 pip move). Get some sleep then look for another trading opportunity.
  2. The trader can tighten their stop loss to about 1.3450 locking in some profits but giving the trade room to possibly break below the upward sloping support line.

Which choice the trader makes above depends on their risk appetite and sentiment of the EURCAD pair. A conservative trader may decide to lock in the trade and take profits. A more aggressive trader looking for a continuationof the daily down trend move may decide to risk some of the profits now for the potential reward of an extended downward move.

To learn more about the importance of trend lines, constructing trend lines, how to use them to identify entries, watch this video from Las Vegas:

Good luck and happy holidays!

Additional Resources

Trend Line Resistance Offers EURCAD Short Opportunity

Support and Resistance

Money Management Lesson 1 Video

---Written by Jeremy Wagner, Lead Trading Instructor, DailyFX Education

To contact Jeremy, email jwagner@dailyfx.com. Follow me on Twitter at @JWagnerFXTrader.

To be added to Jeremy’s e-mail distribution list, send an email with the subject line “Distribution List” to jwagner@dailyfx.com.

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