First off a great big thanks to Ms Ana Wang for stepping in yesterday. I contracted some sort of bug on my trip home from Singapore. Still somewhat out of sorts but much better.
Secondly, for those that would like a great primer on Austrian economics and its view of the cause of the current economic malaise and the cure, Thomas E Woods Jr. has written an easy to read book: “Meltdown”. Well worth your time for an objective, free-market assessment of our situation.
Let’s turn to the GBPJPY
Figure 1 is a 12-month swing chart (yearly trend) that shows that the GBP/JPY has been in a bear market since February 1980.
I want to zoom in on the price action from May 1006 to date.
The Tubbs Model would pose the question: are we in an accumulation pattern? To answer in the affirmative, the market would need to accept above 144.35; to reply in the negative, we need to see acceptance below 118.80.
The turn down at 251.14 and the failure of the market to follow-through on a break of 129.05 suggests to me that we are in a congestion range with the possibility of an eventual upside breakout on acceptance above the July 2007 highs at 251.14. A monthly bullish conviction close above the Primary Buy Zone at 144.35 would lend credence to this scenario.
So, for the moment, my strategy would be to go long.
The next step is to look for a zone.
Figure 2 show an 18-day swing (monthly trend) and a 5-day swing (weekly trend). The bar after the low on January 23 2009 triggered a Spring Buy signal (see Nature of Trends). We then saw a breakout above 141.50. By April 16, the filters I use were in place: time (Whole Point), momentum (Line Change Count) and Price (acceptance above the maximum extension).
Once the filters are confirmed, I look for a retest of the breakout zone to enter a trade. The stop would be below 138 (below the Primary Sell Zone, 138.09).
The 290 minute chart (Figure 3) narrows the wide 18-day buy zone 149.05 (maximum extension) to above 138.09 (above the Primary Sell Zone lower boundary) to three areas:
- 141.35 to 140.00
- 139.70 to 139
- 138.25 to 138.85
The red line in Figure 3 is the last time period (06:00 April 29, GMT) for the low to happen in this setup. The preferred time zone would be the bar beginning at 10:00 April 28.
I would estimate my worst-case scenario entry would be above yesterday’s high at 142.80 for a risk of about 5 points. My minimum target would be the 12-month Death Zone (210 to 190) . In this congestion zone (251 to 118), the rate of ascent has been between 1.3 points per month to 2.8 points per month. If this rate is maintained it would take between 17 months to 37 months to attain the target.
Figure 1 12-M Chart
Figure 2 18-d Chart Primary Zones
Figure 3 290-Min Chart Zone
Refer this blog post to a friend or colleague…
