Playing Sterling For a Bounce

• Posted by Greg Harmon
• on September 11th, 2014

The British Pound, or Sterling, has had its troubles since failing to move higher in mid July. The past few weeks have just been downright ugly. But with ugliness often comes opportunity. And such is the case with Sterling today.

The chart of the Sterling ETF, $FXB, above hardly needs any analysis. It is just flat out oversold. Technically the momentum indicator moved down as low as 12 and during the fall the price fell out of the Bollinger bands. These describe the oversold condition. But alone they do not make a situation for a trade. It is what has happened the last two days that gives a sing of a reversal higher. Maybe an oversold bounce before the net leg down or maybe a big move higher. Either way a trade opportunity. The green candle at the the bottom, a Hammer reversal in Japanese Candlestick parlance, was confirmed higher Wednesday as the price moves back into the Bollinger bands. The RSI has moved sharply higher as well. This is the trade set up for a move higher using the 158 bottom as a stop even a move back to the middle of the Bollinger bands at the 20 day SMA at 162.30 is a 3 point move. A big deal in the forex market. Are you ready for the bounce?

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