Selling the Cable Rally - Take 2

  • Nice profits in June despite activity
  • Looking to GBPUSD again further up
  • Brexit unlikely but risk is still there

ACTUALLY PRETTY GOOD - So June has been a wacky and strange month for me. I have been quite active and the trading has been exhausting. There have been some good ones and some bad ones and then there's AUDNZD, which I continue to hold onto. But on net, as exhausting as it's been and as much as it feels like I haven't made much progress, the P&L is telling a different story, with my book up over 3% this month (excluding AUDNZD). AUDNZD is showing signs of potential with the trade just below cost, but will now need a break of 1.0550 to get going. 

MITIGATING LOSS - I am coming off a wild day of Monday trade where I loved the idea of selling the Pound, but then proceeded to get railroaded after building a short position around 1.4600 and getting stopped on the break through 1.4700. But after the market quickly reversed back below 1.4700 after taking me out, I jumped back in with a very tight stop on this second attempt. The attempt proved to be profitable, though in the end, Monday ended up being a day of mitigating losses rather than making profit. Oh well. It happens. 

MORE COMPELLING - The motivation behind the Cable short is the same today as it was on Monday and is just as compelling, though this time, I will have to wait for another jump before trying again. In fact, the motivation to be short GBPUSD on Tuesday is even actually even more compelling than Monday. Technically, the market is closer to the top of a major range and therefore arguably closer to stalling out. Fundamentally, while Brexit risk has been priced out, there is still risk until the results come early Friday, which means the market shouldn't be too keen on breaking the Cable range. 

Selling $GBPUSD on Tuesday is more compelling than it was Monday. Via @joelkruger

DISCIPLINE - But here's where the discipline (which means sometimes you miss a trade) comes in. As much as I love the idea of selling GBPUSD again on Tuesday, I can't just jump in without having a specific catalyst to draw me into the trade. And so, I am going to hold off on establishing a fresh short position right now, but will happily take another shot if we get right back up to testing the range high at 1.4770. In fact, using Cable's ATR of 180 points, and considering today's low at 1.4630, the projected high could be 1.4810 (1.4630+0.180). So I will look to sell around 1.4810. 

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