2/2 ITM on the USD/CHF

The USD/CHF started in an uptrend Thursday morning and was already at resistance 1 (0.92446) by 1:30 AM EST. Price wicked at resistance 1 and came back up to challenge it again at 1:55. Being a low-volatility time period, I figured that with the resistance already experienced at 0.92446, entering a put option at the level would give me a pretty decent chance of ending up with a winner. Granted, this wasn’t my favorite set-up, and if I had to estimate, I’d say it only had about a 60% chance or so of winning. The trend was up and I only had about a five-pip range to trade back into, both factors going against me. But then again, I did have a previous bounce at a daily pivot point working in my favor, so I decided to take it and hope the low volatility would hold for the next fifteen minutes to produce a winner.

This trade ended up being up and down throughout. Buyers were trying to sustain the uptrend, while sell orders around resistance 1 tried to keep it under. Ultimately for purposes of my expiry, I ended up winning the trade by a couple pips and resistance 1 would continue to hold for nearly fifteen minutes thereafter.

The market permanently broke out of the resistance 1 area on the 2:30 candle. This was expected, as the market was beginning to target an area where two main price levels were located – resistance 2 and a 61.8% Fibonacci retracement that I have drawn in way out on the weekly chart. The Fib runs from 0.70675-1.06263, encompassing a range of nearly 3,600 pips worth of price data in a move sustained back in 2010-2011.

If anything, a breakout trade taken after the 8:30 candle might not have been a bad decision given how predictable a test of the 61.8% Fibonacci level was. Breakout trades are personally something that I’m looking more into myself by looking over past charts and trying to get a feel for when they might be appropriate. This scenario seemed to be ideal for such a trade. For now, I’m sticking with the support and resistance trades, but if I can find the appropriate market situation I’m definitely looking into breakout trades just to become a more dynamic trader overall.

Price immediately went through and closed above both the 61.8% Fibonacci line and the resistance 2 level on the 2:45 candle. Even so, price began to drift around the level for the better part of the next hour even though nothing cleanly set up at the level.

The market went about 15-20 pips above the general resistance 2/61.8% Fibonacci area before coming back down. I ended up getting a rejection of resistance 2 (0.92687) on the 4:25 candle and price never ventured more than a few pips from the level for the next ten minutes. On the 4:40 candle, I entered a call option on the re-touch of 0.92687. After my entry, the market fell back down to the 61.8% Fib, but it held as a support level and by expiration ten minutes later, it climbed back above resistance 2 and finished about six pips ITM.

After this point, I would have considered the Fibonacci level for call options, as that was the most recent main price support that had been established. However, price never got back down there so I began targeting 0.92809 for possible put options as this was the resistance level created by the current high for the day (commonly abbreviated HOD).

Nevertheless, as soon as price did get up to 0.92809, it immediately broke through and the uptrend began establishing new daily highs. I felt like this would be a good point to walk away, since I had gone 2/2 ITM for the day and my next trading level might not be until resistance 3 (0.93030) if the uptrend would  sustain itself. It eventually did get up to resistance 3, but not until after jobless claims were released amid U.S.-positive data at 8:30AM EST. And overall, it was a strong day for the USD. Nearly 100 pips of a single direction’s movement on the USD/CHF is pretty rare in general.