Back In The Saddle

Those of you who follow the Sterling pairs will know that they have been somewhat tricky over the last couple of weeks. As a result my account has basically stood still...

...However, back-testing progress has been significant and as a direct result of this graft, I am focussing on this trade idea for the coming week.

GBPJPY

As can be seen from this simple chart 'Yippon' has been range-bound for 9 trading days...

Further, I note that it tried to break out to the upside early on Thursday morning but was quickly turned back.

On this Daily chart we see that having risen back above the 62 ema, the pair has, thus far, been resisted by the 144 ema.

... I also note that it is 0verbought, and on both MACD and Stochastic Oscillator - it is becoming divergent.


So I am thinking that it might well be due for a trip back down to its rising support line - which you can see is co-incident with the Daily 62 ema.


Let's come down in range to the 4 Hourly chart...

Here, I like the fact that it closed the week below the 4H 62 ema. I also like the fact that the 200 sma (It's next dynamic support) is co-incident with technical rising support.

... And on the 1Hour chart...

... I like the way 62, 144 and 200 moving averages are intertwined, I like the descending price action over the last trading day and the fact that the 1H 800 sma is also co-incident with rising support.

Now, don't get me wrong, this pair is ranging because no-body wants to commit in either direction and I certainly don't have a crystal ball. But for me, at least, evidence of a short term thrust to the downside is mounting.

So, assuming my analtsis is correct, how am I going to trade it ?

Well, even if my hunch is right I suspect it is due one more test of that steep descending resistance line before it tanks. If so I will open a small pilot sell on a convicted 15 min reversal against at this resistance.

It may of course just tank, in which case my intention is to sell it on a 1H close below 145.70, and keep shorting it all the way down to the 1H 800 sma, which by this stage should be co-incident with the 161 Fib level.

But what if I am wrong ?

For me the first indication would be a convicted break of descending resistance. At which point I will enter a break away from the 5minute 800 sma long and target a re-test of the high at 151.50.

Whatever happens, the eventual break of this range is going to be explosive. And when it does I am determined to be on the right side of the market... and to squeeze as many pips out of it as I can !