Trade Idea: GBP/JPY – Buy at 142.60

GBP/JPY – 143.35

Recent wave: Medium term low formed at 120.50 and (A)-(B)-(C) major correction has commenced with (A) leg ended at 148.45, hence wave (B) is unfolding for retreat to 131.00-10.

Trend: Near term down

Original strategy:

Buy at 141.30, Target: 143.30, Stop: 140.70

Position: –
Target: –
Stop: –

New strategy :

Buy at 142.60, Target: 144.50, Stop: 142.00

Position: –
Target:  –
Stop:-

As sterling has retreated after surging to 144.20 yesterday, suggesting minor consolidation below this level would be seen and pullback to 143.00 is likely, however, reckon previous resistance at 142.50 would turn into support and limit downside and bring another rise later, above said resistance at 144.20 would extend the erratic rise from 138.70 low to 144.90-00 and possibly towards resistance at 145.45 later.

In view of this, would not chase this rise here and we are looking to buy sterling on subsequent pullback as previous resistance at 142.50 should limit downside and bring another rise. Below 142.00 support would defer and suggest top is formed instead, risk weakness towards another previous support at 141.35 first.

Our preferred count is that larger degree wave V with circle is unfolding from 251.12 with wave (I) 219.34, (II): 241.38 and wave (III) is subdivided into 1: 192.60, 2: 215.89 (23 Jul 2008) and wave 3 ended at 118.87 earlier in 2009. The correction from there to 162.60 is wave 4 which itself is a double three and is labeled as first a-b-c ended at 151.53, followed by wave x at 139.03, 2nd a ended at 162.60, 2nd b at 146.75 and 2nd c leg of wave 4 ended at 163.00. Therefore, the decline from 163.00 to 116.85 is now treated as wave 5 which also marked the end of larger degree wave (III), hence wave (IV) major correction has commenced for retracement of the wave (III) from 241.38 and upside target at 183.95-00 (50% Fibonacci retracement of the wave (II) from 241.38) had been met, a drop below 160.00 would suggest wave (IV) has ended at 195.85, bring decline in wave (V) for initial weakness to 130 (already met) and 120.