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Long Sterling, Short Staple Food

By Adam Harris

There are many solid trends to choose from this week. Many of the global indices are showing strong technical bullishness on the Monthly timeframe. But I see no clean and clear entry opportunities at the time of writing.

To keep things simple, I am going to focus on a stronger currency, Sterling, while also diversifying into commodities with a look at Feeder Cattle.

Sterling is showing renewed vigour, with the currency displaying considerable strength against most of its trading partners.

On my immediate watchlist is the GBP/CHF Daily chart as the Swiss Franc currently shows weakness. This difference between strength and weakness has formed a clear, stable, and steady trend on both the Daily and Four-hourly timeframes. Specifically, price is retracing back down towards the area between the 10 and 20 simple Moving Averages (MA), which are situated between 1.3630 and 1.3500. There is technical support at 1.3480, and then, depending on how bullish this chart is ultimately going to be, the trend may well only retrace closer to 1.3600.

I will be patient as I wait for a small, or small-to-medium bullish candle to form here and look to enter the trend on the break of the high of this bullish candle. I prefer an entry from the support of 1.3480, as this would offer me additional stop-loss protection if my stop-loss is beneath the level of support.

The next significant level of resistance does not appear to be until 1.4000, and so I will almost certainly split my risk across two orders, looking to take profit at both 1:1, and ideally banking the remainder just short of 1.4000. I can then wait to see how price ultimately reacts to this historically significant level.

If managed correctly, this opportunity could yield a healthy return on my risked capital of 1% or less.

Next on my watchlist is the Weekly timeframe for Feeder Cattle. Currently a small bearish candle is forming up against historical resistance and is also well placed in the sell-zone of the 10/20 MAs. Ideally it should close as near to this as possible.

With my entry below the low of this closed Weekly candle, a break below that would be a good, clean way to join the downtrend as it resumes.

Similar to GBP/CHF above, this chart provides me with extra protection, if my stop-loss is placed above the recent support/resistance historical level of 141.00

I have observed some minor support close to 135.00, but for the most part, price action should have free reign downwards until almost 123.10, offering a potential reward of noteworthy proportions.

Again, I will almost certainly divide my risk across multiple orders, looking to bank some profit around 1:1 and then likely trailing my stop-loss on the second order behind each closed candle. But at the same time I will make sure that even the second order has a take-profit target of 123.15, just in case the final candle is an aggressive one.

In both cases I will monitor these trades with a cursory but diligent end-of day approach, rather than micro-managing them on an intra-day basis. Should any high impact news such as interest rate changes occur, I will be sure to consider banking all profits if I have serious concerns.

Happy trading.


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