Few days ago, keeping up with the theme of past several weeks, I was looking in for a short trade in the GBP-JPY. It was based on analysis of the 4H chart, and here is what I was seeking:
“The intermediate term chart looks ready for more downside, as long as it breaks the support of 168.30. In the perfect world, I would like to see a rebound here, do not care by how much as long as the shows clearly defined new minor low. If this happens, I will place a new sell order just below that level, looking for at least 300 pips move down. In addition, if the GBP-JPY rebounds to about 171, I will also treat that area as possible sell opportunity.”
Immediately after opening for the week, the price dipped to 167.75 and quickly rebounded, forming the minor low I wanted to see. From there, it continued to rally to the 100 SMA, which often proves to offer resistance. Such was the case here and once the price formed the easy to spot bearish engulfing line, I went short the beast at 170.67, expecting a pullback somewhere near the new low from trading early in the week.
On Thursday, the GBP-JPY fell to as low as 168.15. The price started rise rapidly from that point and I decided to get out, with a nice gain of 211 pips. I will wait for more shorting opportunities here, probably under 167.75, and cover the development on these pages in the next few days. Meanwhile, the focus shifts to short-term trades, at the start of the London session. As always, the majors are best candidates, most likely the GBP-USD, AUD-USD and/or EUR-USD.
Mike K.