Gbpjpy

[Lifesong]

Hi Neal

The longterm (LT) weekly chart of GBPJPY refelects the following and for ease I'll refer to round numbers:

Swing high (SH) @ 251 was made during week of 15 Jul 2007 and then dropped to swing low (SL) @ 219 during week of 12 Aug 2007 with subsequent lower SH @ 241 during week of 21 Oct 2007. When applying some Fib expansions between these swings the 1.618 comes to 189. Looking at the weekly Fib studies I also find a 0.618 retracement level @ 187 when connecting the SL @ 148 during week of 10 Sep 2000 and SH @ 251 during week of 15 Jul 2007. All of these indicate that perhaps we've reached a long term point of significance between the 187-189 level. I realize the price action evolved over months and years, but is it worthwhile to attach any value to it? Now my question to you is when would this analysis proof to be correct and would you base your decision on the daily or weekly chart to enter a swing trade (remaining with it for a few weeks or even months)? At the moment the weekly TRSI is down hard, but the daily is close to crossing back up and I would prefer the possible long opportunity. Eventhough I prefer the longside I am also aware taht if the 187 gives way we could be heading for LT trendline and last Fib retracement coinciding around the 176 level. Any opinion on this and possibly an educational video for "dailyupdate" subscribers?:confused:

[FibMaster]

Lifesong,

Your support fib-levels are calculated correctly, and I would be surprised if the market ignores them! Until we have a bounce though, this chart is bearish.

If you compare the rally from (weekly chart) Aug 17 2007 to Nov 2 2007, with the rally from March 21 2008 to July 25 2008, you will find they are similar in size. Now measure that rally dimension from the recent swing low say 186. A rally of equal size from the recent low would be up to about 208-210. So if the market were to make a similar rally, it would be able to get all the way up to 208 without changing from a bearish chart to a bullish chart. It has done that twice already, rallied that high and crashed down.

If such a rally occurred, I'd be happy to short it at resistance.

I don't know which part of a bullish move you would be interested in. You have to decide whether you want to trade the counter-trend rally up to 208 (weekly rally against monthly downtrend). Or are you more interested in the move that could occur above 208 (actually would have to exceed the swing high of Jul 08 at 215.88 to really get bullish), if that higher time-frame down-trend is over. (These numbers assume that the recent swing low holds, which may not happen).

Assuming you want to trade the (imagined) rally to 208, I suggest you want to wait for a weekly trend to cross up, and then buy dips at Fibonacci levels on the daily chart. Study the weekly/daily chart March 08 to July 08, that is a similar type of move. Use that rally as a prototype, could you trade that on a daily, based on the weekly up-trend? Yes! There was a scary patch when the daily chart almost failed (May 30) to take out the prior swing high (May 2nd), other than that, it was a pretty good move all the way.

-Neal.