Trade Recommendation: NZD/PHP
The New Zealand Dollar/Philippine Peso pair (NZD/PHP) started its bull run in May 2009 when it took out resistance of 30. The solid base below 30 helped sustain a long bull run that saw the market go as high as 39.155 in March 2014. In about five years, the New Zealand Dollar grew by over 30% against the Philippine Peso.
Unfortunately for buyers at this level, trend followers began to take profits. The market dropped to 36.902 in June 2014 before bottom pickers stepped in to buy the dip. Bulls tried to keep the momentum alive but they could only carry the market to 38.558 in the same month. With a lower high in place, the pair broke 38 support in July 2014.
From that point, the pair generated a series of lower highs and lower lows until it bottomed out at 29.196 in September 2015. NZD/PHP has been rallying since. It’s may be in a good position to take out resistance of 38.
Technical analysis show that the New Zealand Dollar/Philippine Peso pair is ripe for a bullish reversal as it threatens to breach resistance of 38. Bollinger bands are beginning to contract which means that we may see increased volatility soon. With a bullish bias, the volatility might be the catalyst that takes the market above 38 and trigger the large cup and handle pattern on the weekly chart.
The strategy is to buy the breakout at 38. If bulls complete the breakout, they will likely create a base and may climb to our target of 46. The process may take a year.
Weekly Chart of NZD/PHP
Summary of Strategy
Buy: Breakout at 38.
Stop: 36.5 after the breakout.
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