Trade Recommendation: EUR/SEK

The Euro/Swedish Krona pair started its bull run in September 2008 when it took out resistance of 9.50. As the pair was able to establish a solid base at 9.00, the breakout created enough momentum to catapult EUR/SEK to as high as 11.78695 in March 2009. In six months, the Euro grew by almost 25% against the Swedish Krona.

Unfortunately for buyers at this level, the market was already in overbought territory. As trend followers and breakout players started to dump positions, the market fell to 10.37099 in May 2009. While bottom pickers bought the dip, bulls were exhausted as they could only lift the market to 11.15225 in June 2009.

The lower high killed the market’s momentum. For savvy traders and investors, it was the time to short the Euro to preserve their gains and capital. The increased selling pressure contributed to the market’s downfall. EUR/SEK generated a series of lower highs and lower lows until it bottomed out at 8.17621 in August 2012. The pair has been rallying since, and it appears ready to make a monster move.

Technical analysis reveal that the EUR/SEK pair is poised to take out resistance of 10.50 and trigger the large rounding bottom reversal structure on the monthly chart. With a solid base between 10.00 – 10.50, bulls may have it takes to breach the resistance. However, the pair is flashing overbought signals. EUR/SEK may likely consolidate at 10.25 to shred off overbought readings before it mounts a rally to take out 10.50.

The strategy is to buy the breakout at 10.50. When bulls take out this level, the pair may consolidate for some time before climbing to our target of 12.50. The process may take a year.

Monthly Chart of EUR/SEK

As of this writing, the EUR/SEK pair is trading at 10.40425.

Summary of Strategy

Buy: Breakout at 10.50.

Target: 12.50

Stop: 10.25 after the breakout.

 

Featured image courtesy of Shutterstock

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.