Head and shoulders reversals:- GBPJPY 180 pips

December 25th, 2007 expert Posted in FOREX TRADING ENTRY STRATEGIES, FOREX TRADING EXIT STRATEGIES |

Online Forex Trading concepts used:  Price patterns, Head and shoulders reversal formation, using expectations for exits, momentum divergences, relative volatility of currencies.

This trade was taken from directly our subscription service this week (180 pips in one transaction). We noticed that the GBPJPY had started forming a Head and Shoulder reversal formation and was battling to break through the breakout neckline. There where no less than 5 spikes where the price tried to break through. We recommended a sell just below the neckline and a target at 180pips lower which was the expectation established by the approximate height of the channel in which the Head and shoulders formation formed. The price broke out and reached the target very quickly. The GBPJPY is the most volatile currency and these big moves are not uncommon.

Although momentum indicators tend to give unreliable signals when the currency is trending there was a particularly strong sell divergence supporting the breakout.

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