With a couple of longer-term play in the works, I thought I’d take a beautiful short-term setup on guppy. Is it time for sellers to jump in at technical resistance?
Just because I’m fundamentally bullish on this pair (interest rate differential and monetary policy divergence), that doesn’t mean short-term technical setups should be passed over.
On the four hour chart above, we can see what we at BabyPips.com call, “the Trifecta.” This is a pullback entry setup where three arguments for a reversal back into the trend. In this case, we’ve got Guppy running into moving averages, the Fibonacci retracment area, and a broken support-turned-resistance.
Of course, this doesn’t guarantee a reversal, but I’m sure a lot of the forex traders that are still around during the Summer session are checking this area out. And with that big red bearish candle already formed, I’ve decided to take a small position for a short-term swing play. Here’s what I am doing:
Short half position GBP/JPY at market (172.13), stop at 173.13, profit target at 170.50
I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.63:1. And I’m only looking to hold onto this trade until the end of the week, unless we get a news headline or other catalyst that favors a continued downward move in GBP/JPY. Stay tuned!