Posted by Steven Hatzakis on Tue, Jun 16, 2015 @ 10:52 AM
GBPCHF: Upside of triangle pattern tested as tip formation almost complete as prices consolidate before a breakout
The daily candle chart below shows the price history of the Great British Pound (GBP) versus the Swiss Franc (CHF). This currency pair is known as GBP/CHF, and is trading near 1.4588 around time of publication today and at session highs.
Last time this pair was reviewed in the Ideas You Can Trade was last November when support was tested under 1.50 and then bounced to 1.55. From November the predominant trend continued until the CHF related market-shock caused the CHF to strengthen considerably on January 15th (which caused CHF-priced pairs to drop). The GBP/CHF bounced from 1.26 that day and has since consolidated into a triangle formation and near the tip as can be seen in the chart below (point 4 in yellow).
Today the pair hit the upside of the triangle and pushed slightly above its resistance line, although this could be a false-breakout as prices continue to consolidate towards the tip of the triangle as it completes forming the pattern.
Either way, Forex markets are ripe for a large volatility event to unfold as major technical levels approach across many pairs (for example similar triangle patterns are developing in CHF/JPY, and CAD/JPY pairs), and a series of convergences and divergences in the major pairs will cause changes in cross-pairs such as GBP/CHF.
A clear break-above the upper resistance line of the triangle pattern (see chart below in yellow) is bullish, whereas a break below the lower support line of the channel is bearish.
Below are examples of how to trade a bullish continuation or a bearish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 1.4604 with a Limit to take profit @ 1.4650 and a stop-loss @ 1.4559 Risk/Reward Summary: Limit risk = +46 pips profit / (-45) Stop-loss risk = Gain to Loss ratio = 1.02
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 1.4405 with a Limit to take profit @ 1.4301 and a stop-loss @ 1.4490 Risk/Reward Summary: Limit risk = < +104 pips profit / (-85) Stop-loss risk = Gain to Loss Ratio = 1.22
Medium term daily candle chart:
Save time by using the PremiereTrade Software. Green you Buy, Red you sell. Here is the GBP/CHF