By Russell Glaser – According to the daily chart below, the USD/NOK is showing signs of a pair trading in a trending environment. A buying opportunity may exist as the pair has displayed a tendency to bounce higher from the 10-day Simple Moving Average.
The moving averages for the USD/NOK are aligned in a perfect order which identifies a trending environment. The 200-day simple moving average (SMA) is below the price action and is sloping higher, followed by the 100-day SMA, next the 50-day SMA, then the 20-day SMA, and finally the 10-day SMA.
A buying trend appears as the price has consistently moved higher once the price has reached the 10-day SMA. As such, traders can use this as an opportunity to enter into the bullish trend.
1. The long term trend line taking into account all the price action.
2. A midterm trend line taking into account the most recent bullish pattern.
3. A speed trend line drawn to show the recent upturn the pair has experienced.
4. Resistance level 1 at a price of 6.3175.
5. Resistance level 2 at a price of 6.6000
6. Stop order at a price of 6.1500
The pair may continue its bullish trend towards these two resistance levels. Traders should go long with a first target at resistance level 1 and a second target of resistance level 2.
Should the pair continue to move higher, traders may add to their position if the price retraces to the 10-day SMA.
The Forex Technical Analysis would not be complete without a stop for risk management. A stop should be calculated by taking the Average True Range (14) and dividing it by 2 (1050/2 = 525). Subtract this from the 10-day SMA (6.2025 – 525 = 6.1500). Traders should place a stop at 6.1500 if the trade should fail to materialize.
Forex Market Analysis provided by Forex Yard.
© 2006 by FxYard Ltd
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