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Taking Profits on My Euro Position

I have finally taken some profits off the table in my Euro short position. The initial head and shoulders formation worked perfectly and the Euro continued to break down after the formation had come and gone. While I continue to maintain a long-term, core short position in the Euro (expecting a longer-term decline), I anticipate that after such a large move down in such a short period of time, there is a rising probability of a bounce higher in the Euro to relieve the oversold condition.

Just in case I have taken profits a bit early, I have placed additional short position triggers directly below $1.28 and 1.275. This allows me to automatically increase my short position if the bounce reverses and goes lower. Unless the technical picture changes dramatically, this added exposure would be a shorter-term trade, and I would again take profits and reduce my position back to the core, long-term short after one more spike lower.

Should the Euro break much above $1.285 and especially above $1.30, I will use the potential for a larger bounce to begin building up a much larger short position once again.

Chart Image

All in all, this was nearly a 6% move down in the value of the Euro in terms of the US Dollar. Given the 33.3 leverage that I am currently utilizing on this trade, that resulted in a 190% return in approximately 2 months. Maybe I should quit my day job?! Or perhaps we should create a fund that will allow me to employ some of these strategies on behalf of clients? I will keep you all posted as that develops. If you would like real time access to our latest recommendations, please click here.

Disclosure:  Currency trading involves a high degree of leverage and risk. Please do not participate in currency trades unless you employ strict control of risk and can afford to lose your entire investment.

Positions: Short the Euro, Short the Yen.

Written By: Joshua Ungerecht

Currencies, EUR/USD, Euro, Head and Shoulders Formation, US Dollar