Before we get the ball rollin’, y’all should check out my introductory post on the Weekly Winner to familiarize yourself with my trading framework.
May 9 – May 13, 2011: GBP/JPY Price Action Review
The pair started off the week in bull territory (just like the Chicago-Miami NBA series) and stayed there until it hit the ceiling at the 134.00 handle near the upper WATR. Traders went gaga for the pound after the BOE upgraded its inflation forecasts, but that was as good as it would get on this week, because from that point on, it was all downhill!
After risk aversion set in on concerns over Greek debt (again???), the pair went tumbling down, retracing from time to time and finding resistance at major psychological handles (133.00 and 132.00).
I’m pretty sure I’m thinking the exact same thing you’re thinking right now… “Where was I when all this went down??”
Little did I know that while I had my eye glued to EUR/JPY, looking for chances to short it, GBP/JPY was already offering me exactly what I wanted!
Had we shorted in the resistance zone between the upper WATR and 134.00 handle, when we saw a slight divergence in Stochastic, we would’ve caught the top for the week. In my opinion, a 50-pip stop would’ve been ideal.
Now, we had two clear chances to add to our position, when price retraced to 133.00 and 132.00, both Fib levels. Had we added full positions when price pulled back, and held on to the trade until the end of the week, we would’ve walked away with a solid 13:1 trade. I know, RIDONCULOUS, right?
I hope at least some of you guys out there were able to catch a part of this move. It’s not that often that we get such clear signals. As traders, we have to take advantage of these opportunities, or at the very least, take note of them so that we can capitalize on them in the future… and that’s precisely why I do this weekly price action review!
Before I sign off, I’d like to give a quick shout out to my boy Derrick Rose for leading his team to a 1-0 victory over the Miami Heat. Take that, Las Vegas oddsmakers!