GBP/JPY may be nicknamed after a small fish, but if you had been paying attention to it last week, you would’ve been able to land a big catch! I’m talking about a reward-to-risk ratio of 3:1, son!
Before I tell you all about the setup on Guppy that could’ve given you a 3:1 winner, I suggest you check out my introductory post on the Weekly Winner to familiarize yourself with my trading framework.
Done? Awesome, let’s get started!
September 12 to September 16, 2011 Weekly Winner: GBP/JPY Price Action Review
Like most pairs, GBP/JPY gapped down to start the week as risk aversion carried over from the week before. But it didn’t take long for sentiment to shift. Y’all know all too well that markets can change in the blink of an eye! Before we knew it, GBP/JPY had erased most of its gains and was retesting the week open (WO) already.
Unfortunately, the pair wasn’t as resilient the rest of the week as it soon found itself setting a new low despite the fact that inflation ticked up and employment data exceeded expectations.
Save for a crazy spike on Thursday, price action on GBP/JPY was pretty steady over the latter half of the week. For the most part, it stayed below the 121.50 MiPs as the pound had difficulty finding buyers.
Of course, we could’ve easily taken advantage of the bearish sentiment towards the pound had we recognized the sell signals that had materialized early in the week. When price was approaching the WO, which just so happened to lie in Fib territory, Stochastic was showing a bearish divergence. Sell time, baby!
All we needed to do was place our stop just above the 123.00 MaPs, about 50 pips away, and let the pips roll in!
Had we set our profit target at around 121.50, in the area of Monday’s low, we would’ve made out with a 2:1 winner. But if we had been bolder and set our profit target in the area of the bottom WATR, right around 121.00, our reward-to-risk ratio would’ve improved to 3:1. Awesome results for a swing trade, eh? I certainly think so!
So were any of you able to catch this fish?