Trade # 21: GBP/USD Long

I am going long GBP/USD @ 1.7935, stop @ 1.7375. This is a long-term trade, and I will lock in gains by trailing my stop. I expect price to make a least a new trend high above 1.8400, but it could go much higher, as COT data shows commercials a highly net-short the US dollar index.

The 2h chart above shows a nice leading diagonal formation (or perhaps a series of 1st and 2nd waves). Based on the MACD/RSI divergences, I would expect price to correct sharply at this point to shake out weak long players.

There is plenty of support in the 1.79 zone:
  • 1.7929: Weekly S1 support level
  • 1.7914: 50% fib retracement
  • 1.7911: Wave-iv low

I am guessing that the GBP/USD will not make a new trend low in the near future based on the large deficit-financed market bailout. Therefore, my stop will be below this level.

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