Home Forex Market Analysis Forex Signals GBPJPY Bearish Engulfing after double top at the upper edge of the...

GBPJPY Bearish Engulfing after double top at the upper edge of the descending channel

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GBPJPY has been moving in a descending channel since April 10. The action created a lot of volatility, driving prices back and forth from top to bottom of the channel. The last iteration drove its price to surpass the upper limit, a +2 sigma event, which means the pair was overpriced if we compare it with what we may call the fair price, which is the linear regression channel, the red mid-line.

After the double top, a large bearish engulfing candle was drawn, confirming the reversal signal; thus, we can set up a short trade with entry at the current level, an invalidation point beyond the last top and a target at the projected linear regression point. The Reward/risk ratio of 2 is a conservative value that will ensure our long-term profitability.

Key levels:

Short-Entry:132.175

Take.profit:130.575

Stop-Loss: 132.965

Reward Ratio: 2.03

Risk:735 USD per lot, 73.5 USD per mini-lot.

Reward: 1,491USD per lot, 149 USD per mini-lot.

Position sizing: 2% Risk equals 3 micro-lots for every $1,000 balance in the trading account.

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