The Euro story - A classic trendline break

Chart school time. Look at the diagram below of the Euro
futures of June 2008. It illustrates the trendline break
on high volume. Notice this, it is a textbook example of
how to trade. You go short below the LOW of the break day
which is 4/24/2008. The low is 1.5604. You put a stop
short trade and get executed at 1.5603 ( the Euro is
highly liquid ).



Now the next thing is to find out Fibonacci retracement
levels for the move down and stops for the trade. The
first target down is the 38.2% Fib level which will be
roughly around 1.54 and the stop is at the close on 4/24
which is 1.5651. The reward is almost 200 points down
from 1.5603 to 1.5400 while the risk is 50 points up
to 1.5651. This is a 4:1 risk reward ratio which is
better than the standard 3:1 which most traders aim at.

I will NOT make this trade. I do not trade the Euro,
nor do I trade the future ( I sell options ). Another
caveat is there are 2 very volatile events coming up -
today is FOMC rate decision day where it looks like the
FOMC will finally indicate that it is done cutting
rates ( which may or may not be good for the dollar ).
Also Friday is payrolls day which is always volatile.

Curiously enough, with the dollar looking to have
bottomed in the short-term, this trade may work out
very well. To avoid getting stopped out by post-FOMC
gyrations, increase the stop to 1.5672, where the
important 9-day moving average stalls. This will
reduce the risk-reward ratio ( RRR ) to 3:1 but thats
plenty good enough.

Thanks for your viewership!