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GBP/JPY Trade Update

Last updated 3/20/2009 6:03 PM EST (GMT -5) 0 Comments - Add your comment

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Bradley W. Gareiss

Technical Analyst, GFT

Yesterday, we featured a bearish butterfly that was emerging on the GBP/JPY (  "GBP/JPY May See Strong Resistance Soon" href="http://www.fx360.com/commentary/brad/865/gbpjpy-may-see-strong-resistance-soon.aspx?num=1237586346122"> GBP/JPY May See Strong Resistance Soon ).  The pattern completed early today and quickly moved in our favor.  However, at the end of the day the market shot back up right before the close.  We will not move our stop because we have not reached 38.2% of CD yet.  In fact, if the price rises above 138.89 after the weekend, the trade is still valid for those who have not entered yet.

At this point, we will change our profit targets because the pair has reversed more quickly than we estimated when we first drew the profit targets.  Profit targets are estimates before we enter the trade because we don't know how far the CD leg will actually extend.  The closer the trade reacts to the entry, the larger the profits will be (assuming we hit the profit targets of course).

In this case we have moved our profit targets to 138.00 (38.2% of CD) and 137.38 (61.8% of CD).  These targets are only valid assuming we do not see new highs.  If the pair makes new highs, we will revert back to the original targets at 138.08 and 137.44.  If you have a basic understanding of charting, you can actually determine the exact targets yourself by drawing the Fibonacci tool from C to D.  Of course, don't forget to add the spread because these limits are "buy" orders.

We may change the targets again on Monday if the pair makes new highs.  However, if the pair does not exceed 138.94, we will leave the profit targets at 138.00 and 137.38.

30min Chart - Before Chart.	30min Chart - After Chart- Notice the new profit targets.

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