Cross-Eyeing: Fib Play on GBP/JPY – Trade Closed

Trade Closed: 2010-11-22 22:38

GBP/JPY 4-hour Chart

GBP/JPY just broke rising support line of the ascending channel that it’s been trading in the past couple of weeks and my adjusted stop at 132.90 got hit. It seems that risk aversion was strong yesterday, as higher yielding currencies like the pound fell against safe havens like the dollar and the yen.

This left me with a 90 pip profit on my second position. Here’s a recap of what happened:

Half position – +125 pips / +0.89%
Half position – + 90 pips / +0.64%
Average – +107 pips / +0.77%

So, I wasn’t exactly able to churn out 1% on this trade, but I was really going for a big win and hoping that it would hit the 135.00 mark. I think one part of my execution that I could have differently on this trade was to scale into the Fib levels instead of putting my full position at the 38.2% mark.

This would have gotten me an average entry 50 pips better than where I entered. Assuming I kept the same stop loss, this would have had a double effect, as I would have been able to put on a larger position.

Of course, this is all in hindsight – I really did not think that price would drop (and rise!) so quickly. Also, I’m glad that this trade is now closed, as it was somewhat conflicting with my other EUR/JPY trade.

In the end, a win’s a win and it feels good to finally bag a winner after all those missed trades. Hopefully I can keep this up and end my year on solid note so that I can by myself a sweet Christmas gift.

Trade Update: 2010-11-19 00:38

GBP/JPY 1-hour Chart

We got some wild moves in the market this week, but thanks to some renewed risk appetite (and a little bit of luck!), my trade is still alive!

I had kept this trade open within the week, as I felt that the pair was going to make some news highs. Initially, the 133.00 handle was holding as strong support, but it broke midway through the week and I thought I would get stopped out at breakeven. Fortunately for me, the support line of the ascending channel held nicely, as the pair failed to break support around 132.30.

Then yesterday, traders decided to press the “risk-on” button, which helped boost the pound. Safeties like the JPY and CHF both took a hit and in turn, GBP/JPY made new highs. Yeah baby!

The pair is now in the middle of the channel, and I feel that with no hardcore data coming out, we could this pair continue to range. I’m going to make some adjustments and lock in some profits by moving my stop to 132.90 – just below the area of interest around 133.00. I feel that if the pair continues to trade within the channel, it could find resistance somewhere around 135.00. At that point, I will have to reevaluate my trade and judge market sentiment.

Feels good to finally lock in some decent profits. Thanks for the comments guys! I’ll keep you posted!

Trade Update: 2010-11-15 01:10

GBP/JPY 1-hour Chart

We saw some pretty wild trading last Friday, as the currency pairs were all over the place. Once the London session opened, we saw the pound falling across the charts. Guppy dropped by 150 pips over the span of 3-hours and it looked like it was headed for new lows.

Luckily for me, the wave of risk aversion was short lived as the bulls came back in force. Taking a look at the charts, we can see that the 61.8% Fib held pretty nicely. This also lined up nicely with a major rising trend line. I suppose many traders were eyeing this level.

In any case, the pound remained resilient and midway through the New York session, I hit my first take profit. I moved my stop to break-even, giving me a risk-free trade now. Now, I know I said I was gonna let my remaining position ride, but it seems that the pair has formed a channel on a longer time frame and is now encountering resistance at the top. I may have to cut this short and find a way to re-enter if it seems like bullish run is losing steam.

Trade Idea: 2010-11-12 00:10

GBP/JPY 1-hour Chart

I’ve been scanning the charts and it looks like the pound is being resilient. It’s been on a major roll against the euro and has been holding its own in the face of dollar strength. The reason for this?

Apparently, currency bulls have been tripping over themselves in buying the sterling after the Bank of England‘s inflation report showed that steady growth predictions are still in place even with the economy’s inflation concerns.

The markets also got a kick out of finding out that the BOE fellas are still tossing coins over quantitative easing, which suggested that the economy might not need one after all. Meanwhile, the markets starting losing its love for the yen when less-than-stellar economic reports popped up from Japan this week.

Technically, I see that GBP/JPY has broken past a major descending trend line. This gives me reason to believe that this pair could be headed for new highs.

I’ve popped on the Fibonacci tool to help me find a good entry point, and as it turns out, I see that the 38.2% Fib level lines up with a former high. In addition, the 50.0% Fib lines up with the former trend line, while the 61.8% also coincides with former resistance levels.

While any of these levels may hold as support, I will be placing my buy orders at 132.00. Stochastic has yet to crossover, so I may still have a chance of getting triggered. I’ll be placing a stop of 140 pips, which is equal to the pair’s daily ATR.

My first take profit will be at the recent high at 133.25. At that point, I will lock in profits and let the rest of my position ride while moving my stop to my original entry point.

Again, here’s my game plan :

Long GBP/JPY at 132.00, stop loss at 130.60, pt1 at 133.25

It looks like it’s gonna be a fun-filled weekend fellas! Not only do we have the ongoing G20 summit, we also got the Pacquaio-Margarito fight! I’m really looking forward to this fight and while I’m a big Manny fan, I do think that think it might be closer than what most people think!

4 comments

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>