Trade # 31: EUR/GBP Short

I am going short EUR/GBP @ .8675 and .8700 with a stop on both positions @ .8750. My target for this trade is .8250 and ultimately .7700. I last posted about the EUR/GBP here. I was expecting the pair to rally into a climax top, but instead, we've had a grueling sequence of stop-runs targeting the bears. I think this this rally is near an end.

The above 8h chart shows the wave structure over the past few months. I believe that Wave4 ended at .7693 (as an irregular ABC flat). Wave5 has since taken price up to .8738, subdividing nicely into 5-waves. At .8738, Wave-v exactly equals Wave-i, a common relationship. Notice the strong RSI and MACD divergence. If I am right about this top, we should see lower prices quickly.

The 1h chart highlights Wave-v in detail. Notice that it too has a clear 5-wave rally, indicating that the longer term waves are near their terminus. Within Wave-v, I noticed a very interesting price relationship, given that Wave-(i) is extended: at .8738, Wave-(iii)+Wave-(v) is equal to Wave-(i). I think this means that .8738 is a significant level, and it is safe to place a stop above that point.

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