13 July 2012

GBP/USD : 4-year Triangle

  • Since the worst point of sub-prime and markets bottomed in early 2009, cable has been trading in a triangle formation. Thus far, roughly 6 legs of the triangle is complete, that is to say, a breakout from this point on should not be unexpected. Of course, having taken a very long >3.5 years to form, timing of the downside continuation breakout is correspondingly difficult to nail down.
  • Triangle lower boundary is around 1.5400 now.
  • Cable triangle looks like a 4th wave ie there is a highly tradable 5th to come.
  • Triangle downside objective, if validated, = around 1.22. 
  • Shock and awe is not the objective of technical analysis. Mental preparation is the point of this exercise here.
  • Of course, I have to be prepared that current levels turn out to be support off the triangle lower boundary and we bounce strongly from here. Size matters!

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