My long term bias for GBPJPY is bull.
However, I am a big fan of Divergence.
I noticed there is a Bearish Divergence on Daily chart, and I don’t think I can ignore this.
The price is at the resistance (187.40) now. The daily stochastic shows the clear bearish divergence. Thus I feel like shorting this pair for the next couple of days.
Hourly Stochastic is also showing Bearish Divergence, and it is the beginning of the down cycle. Wow!
The last few candles are big reds. So I feel good about shorting, even though the price is still above 21EMA.
Here is the entry. Below is M15 chart. After the big drop from the top, Stochastic is in the up cycle now.
If the up cycle is over, which means down cycle starts (not necessarily at 75%. It may only go up to 50%!), let’s make sure the price won’t make Higher high (higher than 187.60).
Ideally, the price will be between Fib 38.2 – 78.6% (187.20 – 187.40). Then I will short.
The stop should be above Prev High. (187.70)
The target can be WS1 (183.90). (WR1 -> WS1) But because there is a support at 184.60 (also WPP), we can take it as a target.
Hope this setup helps you build your own.
YJ Baik – Forex.Today @ Tokyo