Contrary Trading – A Live Example And Big Potential Profit Opportunity

Lets see how things are shaping up.

The US v Canadian dollar has given us some great profits from the downtrend now we have that banked profit and were looking for a bounce and think were getting close.

Right, let’s take a look at this trade.

Pull up a free chart service such as futuresource.com and let’s get started.

Key Support

Is 1.10 – This is key support on the daily charts

Momentum is still down in the dollar, but stochastic momentum is oversold and the Relative Strength Index (RSI) is very oversold at just above 10!

Yesterday’s move to the downside may prove a near term low.

Watch for a double bottom to form and stochastics to turn to the upside with bullish divergence.

If the RSI rises as well, we should have at least a good bounce to correct the technically oversold position.

Target would be the middle of the Bollinger band at around 113.00.

Key off support with change In momentum

The key as we said at the weekend is to wait for confirmation before jumping in.

You need confirmation of a near term bottom and change in price momentum before trying the long side.

Stop levels at below 1.10 on a close basis and odds of a bounce are high.

When the majority think one way then

A move in the opposite direction is likely

The dollar has had a lot of bearish news recently and in the short term prices should at least bounce - this is the opportunity outlined above.

Contrary trading is all about trading against the consensus and this trade is definitely that!

My in box is full of lots of reports telling me the dollar is in free fall and has no chance of recovery – but in the short term there is:

As all the bearish fundamentals are discounted and a bounce should therefore occur.

This is what contrary trading is all about – low risk high reward and trading against the majority.

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