USDCHF target from triangle breakdown on monthly almost reached. Expecting overshoot by couple of hundred pips.

http://chart.ly/j2qpt7h

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Given the massively oversold state USDCHF is already in, what is your basis for expecting another 200 pips? I’m not saying it isn’t possible, but whenever I see people wildly extend their targets once their initial expectation is met, the move usually experiences a reversal. What kind of analysis are you using to obtain this conclusion? I see you have drawn some support and resistance lines. Are you counting/measuring waves?

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the target area around 75 comes from the measured move of the size of the triangle added/subtracted to the breakout price. now there is no fundamental basis for this target, its based on classical technical analysis rules, which usually provide targets to book profits. That doesn’t mean that the price would touch the area and reverse from there. Its an area where one should potentially consider booking profits.

Further, I am not in this trade(short USD/CHF) at the moment. But if I was I would book my profits this week, spreading it out very 2-3 days. Price we have at the moment looks pretty attractive just for the reasons you mention it.

What I am saying is if want to enter a long trade on Usd/chf I would wait for price to drop below 75, and buy there instead of buying now. My basis for expecting another 200 pips is that I have seen in such strongly trending markets which witness blow-off tops/bottoms, or parabolic moves after a long period of strong trending in one direction, is that they typically tend to continue further than we expect. Can i buy usd/chf today and say with confidence that yes today is the absolute bottom for this move. That would be foolish. Cause it will go against me some distance, give me some pain, before it makes money for me.. and which is why I am saying it might still go 100-200 pips further.

More so, I’d rather be buying when hordes of traders are cutting their losses rather than hordes of people buying the fall (as its happening in usd/chf yest & today). But if you have deep pockets, and you are a fundamental oriented positional trader you might want to start building positions now. As a trader, I think the best strategy is to avoid trying to catch a falling knife. The ideal strategy would be to wait for a 200-300 pip rally from a low, wherever that low might be, and then buy the small 50-80 pip fall after that rally with a 100-150 pip stop loss. If ultimately that’s gonna be the quantum of your stop loss, its better to bet that amount when market has shown strength in the direction of your trade. Much better odds that the trade would work out then than now.

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Massive intervention hit JPY cross pairs with a 130 pip move in USD/JPY in a 10 minute period. 78.50 is the 20-day SMA area and will provide resistance. The Trade Signal to get long USD/CHF from 0.7680 is positive by 60 pips. If 10-year Treasury values drop under 126.70 USD/CHF should hold higher.

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Because of NBS and BoJ intervention:Unless you already have opened orders related to CHF and JPY, I advise you to stay away of the market at least for a few days, to see how the market is settled.
Best regard!

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