After breaking below 4-hour channel support on Tuesday, the GBPUSD finds itself testing the 1.2326 handle as new support. The breakdown was one of two potential opportunities that I mentioned at the beginning of the week.
The short setup materialized with a 4-hour bearish pin bar as shown in the chart below. Although buyers tested the limits, they fell short of breaching the pin bar high by 15 pips.
A 50% entry of the candlestick in question would have yielded 3R or 6% profit if risking 2% of your account balance. If targeting 1.2090, that figure becomes a potent 7.4R or 14.8% profit.
And that’s without pyramiding on the way down. This is why I always preach that you only need one quality setup each month to make a substantial return.
While the pair will likely find a few bids in the 1.2326 area, I don’t expect the level to hold for long. For those who are short via the November 15th pin bar, a close below this level could offer an opportunity to add to the position.
If you aren’t yet in this one, a close below this level could offer a compelling opportunity to get short. Just know that the lower your entry price is, the more your risk to reward will suffer.
Below 1.2326 we have two October lows near 1.2090 followed by the flash crash low at 1.2000.
Want to see how we are trading this setup? Click here to get lifetime access.