Broadening Megaphone in GBP\JPY

Submitted by ChartSecret.com on Mon, 07/06/2009 - 17:39
in

A Broadening Megaphone chart pattern in the GBP\JPY, support is right on the 153.0 round number, and resistance is an ascending trendline with 3 bounces of price - strong trendline. This formation is also at a round support level which enforces the validity of the Support level. This is a reliable chart pattern, with high win-percentage, which usually reaches the projected target.

This formations usually break downwards, though there is a chance of break up. A general idea is that traders do not guess which way the pattern will break, but wait to see how price acts with respect to Support and Resistance levels - and react.

Pattern size is about 100 pips - and this is the projected target after the breakout. This number will be used to calculate Risk:Reward ratio.

Trading

  1. Short trade will be taken after a downwards breakout and a pullback to 153.0 Support level.
  2. Short trade will be taken after a price touches the Resistance trendline and confirms with candlestick formation.

We won't be trading the pullback to the ascending trendline as it is a weak signal.