FOREX DOJO TRADE # 7

Tonight I will place a sell order for GBP/JPY @ 128.60 with a TP 127.90 and SL 129.15.
Due to the pair breaking through support in the 129.00 region, the range between 130.00 - 129.00 has broken to the downside. Resistance now lies in the 128.80 area but pressure seems strong enough that we may not reach that level. A break of 129.00 could bring 129.50-129.60 into play fairly fast, which is why I have placed my SL close to that level. There are not many indicators that can help to predict price movement from this level so this is strictly a momentum catching trade. Here are some of the factors for which I prefer the short side:

1. Breaking of support first at the 129.40 level than again in the 128.90 level indicates that longs are bailing out and bears are gaining momentum. The lack of bounce at these levels also signals a strong bearish sentiment.

2. Next support rests in the 127.80 zone which should be where sufficient buy orders are placed due a seemingly strong trendline that lands in the area. Since this latest move looks like a sharp one, I would guess that the pair will test this area.

3.100 EMA on 5min-4 hr have remained well above the price which reflects the strength of the down move. In my opinion any rallies will be absorbed ahead of the EMA (based on 30min-1hour charts)

4. NEVER FIGHT A TREND when a move such as what took place yesterday happens, it is always wise to follow in the same direction. Simply put, "the trend is your friend" as the much repeated saying goes.