Chip The Chartist - 2013-01-27 538x218

Chip The Chartist Weekly Report – 27-Jan-13

A potential “mini bubble” has occurred here as EURGBP is now up over 10% in 6 months.

It is over 4 years since EURGBP was this much overbought on the Weekly chart and at 71.36 I expect some selling pressure soon. I have highlight previous overbought corrections from levels below 70.

Chip The Chartist - 2013-01-27 - EURGBP Weekly Chart

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This is interesting because of the extreme overbought condition on the Weekly timeframe – There has not been a reading greater than 70 in over 4 years.

However, any market can remain overbought for some time so some caution is required here and I expect I may need a few bites at the cherry (may get Stopped out once or twice) before I get rewarded with a reasonable sized correction.

Entry
I will personally be looking for an entry on the lower timeframe here. I will look to enter when I see strong technical selling evidence on the 1 Hour chart, preferably a breakout to the downside from a tight consolidation (over at least 10 candles (preferably more)) of around 20 – 40 PIPs.

Stop
Above the consolidation.

Target
As I am trading against the trend here I will look to take half profits at equal Risk:Reward from my Entry. Then I will use a Trailing Stop the same size (Original Stop – Entry Level).

I expect this uptrend will reconvene after a short term correction from this Overbought level.

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DISCLAIMER & COPYRIGHT

This report is based on my analysis on my charting package. It may differ to yours as it can be affected by time, market movements, charting packages and broker prices. I accept no liability for loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on any information in this report or analysis.