GBPJPY—possible shorts coming up

The broadening pattern I wrote about on the 15-minute chart on Friday has turned into a general upward sloping channel. The pair has pierced the top of it once and fallen back but not significantly. It looks as though it may be meandering back to resistance at 139.25/35. In addition to being near the top of the channel (138.87), this would be .618 of the move from the 2/17 high of 143.65 to the low of 132.03. It’s also a fib confluence zone and has served as prior resistance. If it makes it through here then the next logical resistance is 141.50.

As always, with this pair you want to have tight stops. Going long here, in the belief it will get to at least 1398.87, is a bit riskier from a probability standpoint. The stop would need to be wider—below the bottom of the channel, especially since the bottom is 138.07 which is also near a round number. However, if you believed the pair would continue to climb from the minor support level at which it's currently offered (138.45), you'd go long. As readers know, I have no problem with riding this pair up and down but it only works if you're rigorous with stops and are absolutely willing to reverse. Also, the reward needs to be there. 30 to 50 pips of reward doesn't do a lot for me. Watch momentum, i.e. with RSI, as well.

Support is at 138.26, 137.07, 136.55, 135.19, 134.53 (strong), 133.92, and 132.03. Resistance is at 138.50, 139.25/50, 138.37, 138.96 (strong), 139.58 (strong), 140.57, and 142.64.

Here's the 15-minute chart.












© Dianne Fecteau, 2010. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.

My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog, you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.