Cross-eyeing: A Sweet Technical Setup on GBP/JPY – Trade Closed

Trade Update: 2011-12-22 22:12

GBP/JPY 1-hour Chart

Resistance at around 122.20 didn’t hold this time around, and unfortunately, my GBP/JPY position got stopped out. The pair just kept crawling up the charts ever so steadily, until it finally stopped me out as the pound went on a mini-rally halfway through yesterday’s London session.

In hindsight, I probably should have closed out my position at a smaller loss when the pair failed to fall back through the 122.00 handle after spiking up on Wednesday. This was a clear signal that the bulls were in control and I should have taken the bounces off 122.00 as a sign that it had become a strong support level.

Stopped out at 122.60. -68 pips / -0.75%

The good news though, is that I risked less than what I normally do and the loss doesn’t hurt my account too much.

Thanks for following me on this trade. I’ve got a little surprise for all of you, but that can wait till after Christmas. For now, it’s time to enjoy some fried bunny ears and open some presents!

Happy holidays, everybody!

Trade Idea: 2011-12-21 03:58

What’s crackin’ fellas? Cyclopip here with another trade idea. I’m hoping GBP/JPY will deal me one last winner so that I can end the year with a bang!

GBP/JPY 1-hour Chart

When I took a glance at the pair’s 1-hour chart earlier today, I couldn’t help but notice that it was flirting with the 122.00 key resistance zone. Scroll back a couple of weeks and you’ll see for yourself that this was a major area of interest! In addition, GBP/JPY already reached its upper WATR, suggesting that the pair’s rally may be coming to an end soon.

Of course, I wasn’t content with just consulting the 1-hour chart, so I took a peek at the 4-hour chart as well. Guess what I saw? Three consecutive dojis! My brother from another mother, Big Pippin, did a good job highlighting these reversal candlesticks in his Daily Chart Art today. I suggest you take a look!

Anyway, with the technical aspects of the trade lookin’ as sweet as honey, I decided to take a look at the fundamental side of the equation. In my opinion, the pound could see significant losses in the coming days. Yesterday’s risk rally came as quite a surprise and there was really no strong fundamental backing to support it. The euro zone and the global economy are still facing the same risks to growth as they were two days ago; nothing has changed! In that respect, I think the rally will be short-lived.

Furthermore, we have U.K. public sector net borrowing data coming out later at 9:30 am GMT. People say the U.K.’s budget deficit quadrupled last month, which isn’t exactly good news for a country that’s supposedly cutting costs to trim its debt.

Also at 9:30 am GMT, the MPC meeting minutes will be released. I wouldn’t be surprised to read a few dovish statements in this report even though the BOE decided to leave its monetary policy unchanged. The economy still faces significant risk and investors believe the BOE may even increase its asset purchase facility by another 75 billion GBP by February next year.

With all of this in mind, here’s what I did:

Shorted GBP/JPY at 121.92, stop loss at 122.60, profit target at 121.00.

I tucked my stop loss a safe distance away, above the 122.50 MiPs. As for my profit target, I think 121.00 is a reasonable and not-too-ambitious goal since price visited and reacted to this level several times in the past.

As for my risk on this trade, I’ll be risking just 0.75% of my account on this trade.

So what do you all think? Anyone care to join me?

  • Forex

    Well I found this blog really useful and informative for me. Thank you for sharing it to us.

    • JamieJ

      If you want to lose thats great!

      • Costarica

        chill out man..

        • JamieJ

          These setups are no more than 50/50. I would rather go to the casino than trade these stupid setups.  It’s very misleading to new traders.

          • Costarica

            yo JamieJ man..perhaps you should start your own post and share your winning trade with all the newbies..

          • Marshall Clarke

            lol @ JaimeJ….  They are insightful in their own way… I agree with you on many levels but the point here isn’t to teach and mentor an extensive trading plan, merely elucidate some of the basic concepts involved in trading. I personally think more of BabyPips should focus on money management and position scaling, HappyPip has made some headway here. But take away what’s useful to you. There is ALWAYS something to be learned… even if the overall message is misleading.
             

          • benben

            I wonder if Marshall and Jamie could talk a bit more about why this is a bad setup. It would be helpful to a lot of us aspiring traders.

  • Camelman

    What ….. Little surprise …… after Christmas ….. I can’t beleive you are doing that ….. :) Now I won’t be able to sleep :)