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Will GBP/JPY Resume Uptrend at 136.10?

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Last updated 3/18/2010 7:20 PM EST (GMT -5) 13 Comments

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Bradley W. Gareiss

Technical Analyst, GFT

There are a lot of good patterns developing after a recent drought.  The bullish Gartley forming on the GBP/JPY 1hr Chart below is one of the better patterns emerging at the moment.  The Gartley has nearly perfect price symmetry, and the trade would enter at the bottom of the bullish channel on the 4hr Chart.  The CD leg barely has moved down, so the pattern's time symmetry is up in the air.  However, if the CD leg drops with approximately the same slope as the AB leg, this would be an outstanding trade setup.

We are looking to buy the GBP/JPY if it falls to 136.10 (Point D).  Point D is located at the convergence of the following points:

We will now go over what to watch for assuming the pair continues falling toward our entry at 136.10.  If the pair moves down rapidly and has long bars near point D, we will not enter the trade.  Also, if the pair comes within 15 pips of reaching our entry, does not enter, and reaches 137.05 before entering, the trade is invalid.  The trade is also invalid if the pair rises above 138.50 before hitting our entry.

To recap, we will look to buy the GBP/JPY at 136.10 with our stop placed at 135.58.  Our initial profit target is 136.89 (38.2% of CD).

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  • 4hr Chart - Trade would enter near the bottom of the bullish channel.
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  • 1hr Chart - Bullish Gartley; buy at 136.10.

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Forex Trading and FX360 .com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

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Comments (13)

kingnai

March 19, 2010 at 11:03 AM ET

so I take it those were long bars that invalidated the trade??

bgareiss

March 19, 2010 at 11:14 AM ET

The AUD/USD trade was definitely invalidated. That one was about as obvious as it gets. However, the GBP/JPY is borderline. The trade completed just after perfect trade symmetry, and the bars at the end aren't wildly long. It is up to you what to do in this situation, however I will have to "count" this trade to our results because it is borderline. However, in real life I probably would skip it because it isn't worth the risk and there are plenty of other good patterns forming. I hope that helps.

Brad

kingnai

March 19, 2010 at 11:24 AM ET

thanks for all of your teachings, they are starting to stick!!! Looking foward to other trade opprotunities

bgareiss

March 19, 2010 at 11:26 AM ET

I am glad we can help you out. The markets are beginning to move in harmony with the patterns after a little bit of a drought, so check back regularly because there will likely be more good learning opportunities in the current conditions than we have had over the past month or two.

Brad

madmoney101

March 19, 2010 at 04:36 PM ET

Brad,
Thanks for all your time you give us. Could you help me understand how to adjust the target. I got in the GBP/JPY trade at 136.10. It dropped to 135.61. Is this a situation were the target is adjusted. Thanks

bgareiss

March 19, 2010 at 04:39 PM ET

This is definitely a case where we will adjust the profit target. As usual, we will draw our Fibonacci tool from point C (138.39) to the true point D (135.61). Therefore, the target will be moved to 136.67. I will be posting a full update to this trade soon.

Brad

madmoney101

March 19, 2010 at 04:46 PM ET

Thanks. I probably missed a previous article on this topic im sure. Still working on the navigation of this site.

bgareiss

March 19, 2010 at 04:54 PM ET

Here is a more detailed explanation of how we adjust profit targets:

http://www.fx360.com/commentary/brad/2694/adjusting-profit-targets.aspx

Brad

pepeojuan

March 19, 2010 at 07:54 PM ET

i think that this pair is going down because broke the up channel, and is a regular divergence.

pepeojuan

March 19, 2010 at 07:55 PM ET

i think that this pair is going down because broke the up channel, and is a regular divergence.

bgareiss

March 19, 2010 at 08:02 PM ET

Well, we will see on Monday. I am not sure what will happen, but channels regularly are breached before recovering. Once I set the trade up, I let it run it's course as I have found sitting tight is usually the right decision.

Brad

kingnai

March 21, 2010 at 01:59 PM ET

Am I to early to want to short the AUDUSD?

bgareiss

March 22, 2010 at 12:52 PM ET

That is a really general question with tons of variables. How much are you willing to risk? What is giving you a signal to go short? Do you use a stop and where will that stop be placed? Why will you place your stop there? Where will your profit target(s) be and how will you determine this? What length of time do you generally want to hold the position? There are more questions I could probably ask, but the point is that you have to determine all of these answers on your own rather than simply going short or long without any plan. Interestingly, the pair did shoot down on the open, but has since shop up above the open. This is a great example of why we have to plan trades out. It is very possible that someone could have profited off a short trade, and it is equally possible that someone could have lost on a short trade. This is exactly why open ended recommendations aren't very useful. I am not meaning to come across as rude, I just would like to illustrate how important it is to plan trades out in a detailed manner.

Brad

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