GBP Short Trade Possibility 2012-04-21

Here we will look at the possibility of shorting the GBP/USD on the daily time frame. Before that, I'd like to mention that I am still holding long positions in both gold and the AUD/USD. to look at these trades and the theory behind them, go to the previous 2 or 3 blog entries listed on the right hand column on any of the futures blog pages.

Now, let us look at the daily chart for the July British Pound futures.

What we are seeing in the above daily GBP futures chart is an MACD-price divergence. Prices on Friday cleared the previous high from 2 weeks ago by about 0.0090. However, both the MACD histogram and the moving averages are lower than they were during that high 2 weeks ago. This is a sell signal. However, care must be taken. If prices have another strong up day on Monday, then this MACD divergence could be broken.

I will be watching British Pound (GBP/USD) prices quite closely Sunday evening to decide whether or not to enter a short trade. As of right now, I am leaning towards yes. However, I still have two open long trades, one in gold and one in the Australian Dollar. I really hate having so many open trades. Two is already too much for me, with this British Pound trade that will make 3, and that makes me really uneasy. I'll be watching for the MACD divergence to be broken to give me a no-go sign, and I'll be watching the 60 minute Pound chart for an entry opportunity. As of right now, the Pound closed on Friday giving a potential short entry signal on the 60 minute chart. All signs are pointing to me entering a short trade, but like I said, I hate having this many trades open. We'll see.

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