Thursday November 12, 2009 - 21:41:18 GMT
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FX Times: Daily Technical Update GBP/USD Setup Via FX Times
November 12, 2009 (GBP/USD) Setup with DivergencesGBP/USD Bearish Confirmation
GBP/USD Divergence in Multiple Timeframes
- 1H: We anticipated a test of the previous support as resistance. (Refer to Daily Technical Update 11.11.2009 GBP/USD ). The market gave us a bearish confirmation by holding the 1.6625 area as resistance.
- The market declined from there by has trouble breaking below the
short-term support. Instead a bullish divergence has formed. A
consolidation instead of a rally followed this bullish divergence, and
the stochastic is near overbought now, so the an intra-day momentum
cycle is almost complete.
- Therefore, we can treat the 1.6600 to 1.6650 area as resistance and
consider the bearish scenario with any topping action from the current
short-term rally attempt. However, we need to also assess the higher
- Daily and 4H: In the daily, we see very strong
bearish reversal candlestick combination along with bearish divergence
at an important resistance (after a clear-out or a fake breakout).
- However, in the 4H timeframe, we see a bullish divergence as price
action tests a 78.6% and a 50% retracement level, coinciding with the
completion of a bullish Gartley.
- This suggests that although bears are starting to take over, we may
still have another attempt at a rally. The 4H stochastic is oversold
and suggests that if the market was in the daily, that the market
should follow with a rally.
- However, as we have noted, the daily shows oversold conditions at resistance.
- So, we see in the 4H a possible rally following the reversal
combination. This is actually preferable as it will give us better
reward to risk ratio after the correction. Look for topping action in
the 1H timeframe between the 1.6600 and 1.6650 area.
- Currently, I am seeing this topping action develop. From this
point, with a target at the 1.6250 as a target, we are at about 1.6:1.
Commodity Trading Advisor
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