These switching leads on the latest Brexit polls remind me of yesterday’s NBA Finals game but I doubt the pound can make much headway before the official vote count is announced. Because of that, I’m looking at this potential short trade on GBP/JPY.
As I’ve shared with y’all in my Weekly Watch blog post, Guppy is showing a neat break-and-retest setup on its 4-hour chart, showing signs of a pullback to the broken support around 154.00. This coincides with the 50% Fib level and the top WATR, making it a potentially strong resistance level.
At the same time, stochastic is already indicating overbought conditions and is starting to turn lower, which means that pound bears are ready to push price back down to the previous week low at 145.40 and close the gap.
So far, Brexit surveys are showing mixed results, although most are showing a slight lead in favor of those voting to remain in the EU. Still, I don’t think pound bulls would be aggressive enough to push GBP/JPY significantly higher until the results are made official. Jitters ahead of the event and some profit-taking could force this pair to retreat before the voting centers open.
I haven’t set any orders yet since I plan on waiting for reversal candlesticks to form around the top WATR before hopping in. If I’m able to short, I’ll set a wide stop past the swing high to give me a chance to cut losses in case volatility surges. I’ll be aiming for the 145.50 area for my profit target but I plan on closing this position before the referendum starts.
Here’s my plan:
Short GBP/JPY at 154.25, stop loss at 164.25, PT at 145.75. I’ll be risking only 0.25% of my account on this setup since my buddy Forex Gump recommends taking it easy ahead of the Brexit vote.
As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups!