New Trade Alert: Sell GBP/JPY

Last updated 12/2/2009 10:35 AM EST (GMT -5) 16 Comments

FX360 Technical Analyst Staff

Technical Analyst, GFT

The GBP/JPY has rallied since completing the bullish 30min Gartley/butterfly pattern hybrid highlighted on Monday's technical feature, and has now completed a solid bearish 2hr Gartley just below 146.0. This presents an ideal selling opportunity as the overall trend seems to be bearish, and even more so because the risk/reward is rather favorable. Of course, there's always the possibility of being wrong so stops are crucial because if we see a close above the 146.0 handle chances are a potentially strong bullish continuation move may be in progress so we'll want to make sure to cut our losses quickly. Should this occur, we would look for prices to extend up to the 127.2%-161.8% of XA near 150.0-153.0, respectively.

In terms of profit targets--assuming the current top near 146.0 holds and prices start to drop--the initial target of 144.11 (T1) is set just above the 38.2% retracement/correction of CD at which point stops will be moved to break even. The secondary target of 143.10 is just above the 61.8% retracement of CD and serves as the primary target considering overall trend. As always, we want to trade what we see and not what we believe, so if prices do drop as expected we'll want to take a quick glance at what price action looks like as we approach either target. If we see bullish patterns completing at either target, for example, we may consider taking profits at either target. Conversely, if we see signs of strength to the downside (gaps and/or long bars, for example) we may look to extend targets perhaps as far as 127.2%-161.8% of CD. Again, it all depends on how price unfolds so we'll cross that bridge when/if we come to it. As it stands now, we're short the GBP/JPY from 145.41 with stops at 146.12 and targets at 144.11 (T1, stop to b/e), 143.10 (T2).

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Comments (16)

Semaj

December 02, 2009 at 11:07 AM ET

R, I see price above the 200 EMA from the 1 hr on down (intraday). Do you look for intraday setups on smaller time frames like a 15 min chart that agree with an intraday trend? While this trade may hit, today a long trade setup seems even more likely. Thanks

rstojsic

December 02, 2009 at 11:27 AM ET

hi Semaj, yes I do look across multiple time frames, and generally speaking patterns on higher time frames carry more weight than shorter ones. Keep in mind that these patterns help identify significant tops/bottoms so they are in essence temporary leading reversal indicators and i'm guessing that most cases would result in a contradiction when looking at a lagging indicator such as a 200 ema. It seems to me that key intraday support comes in around 145.0 since that's where the 15 min bull trendline comes into play.

Semaj

December 02, 2009 at 11:42 AM ET

Which just so happens to be @ the 1 hr 200 ema, of course lagging by default but focused on by a large majority of market players as a dynamic level. At this point a test of the 4 hr 200 is not far off for this pair. Just a thought :)

T1 just came close but missed by a pip.

Semaj

December 02, 2009 at 11:56 AM ET

T1 hit, nice :)

pp22

December 02, 2009 at 01:22 PM ET

T1 hasnt hit yet, as of 1:18pm est hasnt come even close to 144.11. Lowest its gone since the trade opend was 144.94 on the sell and 145.00 on the buy

Semaj

December 02, 2009 at 02:03 PM ET

Oops, your right. 1.4511 hit not 1.4411. I didn.t take that trade, still some upside to it from what I see.

pp22

December 02, 2009 at 07:05 PM ET

Dang, stopped out again, luck is not on your side these days Roger...

DMW

December 02, 2009 at 07:07 PM ET

Well that was a disaster

FXDragon

December 02, 2009 at 07:46 PM ET

SL too narrow, i'll short by the end of this week

Semaj

December 02, 2009 at 08:21 PM ET

For intraday entries the 200 ema deserves the respect it has earned from many candles prior. Just a thought :)

Victor

December 02, 2009 at 08:29 PM ET

I read the recommendation this afternoon and, conducting my own fib study, determined that 146.21 is a 50% fibonacci retracement of the range fall from 22OCT09 high and the Thanksgiving day spike low. It looks like a logical short. So, I am in @ 146.19. I am open to comment on the trade.

Semaj

December 02, 2009 at 08:53 PM ET

Looks like we are bumping into resistance on a 4 HR, previous support coming into play. I still think we can hit the 4 hr 200 ema. Dont get greedy, Japan is considering O% rate policy which is the reason for the JPY weakness of late, I read that somewhere. Good luck :)

Wade Pugsley

December 02, 2009 at 11:13 PM ET

Semaj,

You are confusing the hell out of me... what are you looking at?????

Semaj

December 03, 2009 at 08:25 AM ET

Intraday(5 or 15 minute chart) I use the 200 as my market bias & only look to enter a trade in the direction of the 200. On a 4 hr it tends to act as S&R, notice that price did hit the 4 hr 200 & then paused. Who do you think trades 4 hr charts, retailers or institutions. Try this, take any fast momentum indicator and let it move against the intraday 200 ema & look at price action as it starts to agree with the 200. If price passes thru a 5 min 200 then a 15 min 200 is likely to be S&R. The intraday 200 keeps you incheck with longer term money which tends to be a favorable side to trade with since this market takes a long time to reverse direction. If the 200 is flat we are likely in a sideways market, channel trade. Sorry for the confusion, good luck :)

youngbeast777

December 03, 2009 at 04:43 PM ET

Thanks for deleting my post, it proves me right ;)

INNSIDH

December 04, 2009 at 09:42 AM ET

Do you guys really know what you are doing, djeezes.
Wich i could find a job like that.
The best way to earn money is to stay out of this business.

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