Timeframe: D1 Recommendation: Short Position
Entry Level: Short Position @ 171.75
Hedge Level: Stop Buy Order @ 173.00 (Take Profit Level @ 1.7500)
Take Profit Zone: 164.75 – 165.25
Stop Loss Level: 173.00 (We will not use a stop loss order to close this trade for a loss and execute this trade as advised below). We do use stop loss orders to protect our profits and close a trade for a profit. Each trader may decide if and where they would like to place the order.
The GBPJPY has rallied as visible in this daily chart (D1). This currency pair has formed a bullish price channel, but is currently trading at the top of its formation and due for a correction. We expect the GBPJPY to top out and correct back down to its support zone which is marked by the light blue box in the above chart.
MACD has formed a negative divergence which is a bearish sign as momentum does not confirm the higher highs set by price action above. RSI is trading in overbought territory near extreme conditions and has formed a negative divergence as well.
We recommend a short position at 171.75 with a potential second entry level at 175.00. We also recommend a stop buy order at 173.00 with a take profit target of 175.00 in order to hedge our initial short position and before adding new short positions to this forex trade.
Traders who wish to exit this currency trade at a loss are advised to place their stop loss order at 173.00. We will not use a stop loss order and execute this trade as recommended. Place your take profit order at 165.00.
Here are the reasons why we call the GBPJPY currency pair lower:
- The GBPJPY currency pair is currently trading at its ascending resistance level
- MACD has formed a negative divergence which is a bearish signal
- RSI is trading near extreme overbought territory and has formed a negative divergence as well
- Profit taking in order to realize trading profits which will add selling pressure
- New short positions by institutional swing traders
Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.