A Possible Trend Continuation for GBPNOK

After a steady pullback, evidence is mounting for a trend continuation thanks to price rejecting a trend line as well as a horizontal level of support. This could be the zone where renewed buying pressure potentially pushes price higher.

The cross-pair GBPNOK has been trending upwards for just over a year (since February 2013) and has made decisive higher peaks and higher troughs (“higher highs and higher lows”) on the weekly timeframe. The higher troughs conform to a steep trend-line which price had just rejected. This point of rejection overlaps with a horizontal level of support at 9.8427.

Price has thus arrived at a confluence of technical levels, adding weight to the argument that price could continue to the upside and make a higher high, as it has done three time in its upward trend so far.

Furthermore, GBPUSD is trending upwards on the weekly, reflecting the increasing strength of the British Pound against the US Dollar. By comparison, the US Dollar is continuing to gain in strength against the Norwegian Krone, as is too reflected in its upward trend on the weekly chart. This makes the British Pound the strongest out of the three and Norwegian Krone the weakest in comparison, thus adding weight to the argument that there is more upside potential for GBPNOK.

A possible signal for a long position

Last week’s close as bullish pin bar reversal rejecting both trend line and horizontal level is a good sign that bulls have defended this level, causing price to “whiplash” off it.
The open and close in the top half of the bar validates it as a bonafide pin bar.

How to trade this set-up

Risking a small amount of their trading account, (ie: no more than 2%) many traders will simply place a buy order at the high of last week’s bullish pin bar reversal (adding the spread the broker has quoted them for this pair plus an extra pip) with their protective stop loss below the low of last week’s bar (subtracting spread and an additional pip). 

They will wait for the market to come to them. If they are triggered into the trade by the end of the week then they will subsequently trail their stop loss behind the low of every second buyer bars on the same time frame they are trading (ie: the weekly chart).

A potential target for this trade could be just below the previous swing high for a higher probability outcome rather than targeting a “higher high”.

If traders are not triggered into the trade by the end of the week, they will typically delete their orders as the market has indicated that there is no momentum to the upside. 

As this trade is a weekly set-up, reaching the target will take time (potentially weeks, if not months!), so traders should consider this more of a long-term “investment-style” trade.