GBP/JPY’s recent price action has formed a bullish Break & Retest pattern – an underrated pattern which represents a structured way to navigate breakouts.
Here’s the three key components of GBP/JPY’s Break & Retest pattern:
1.The Breakout: On Tuesday, GBP/JPY made a decisive move higher, breaking above a significant resistance level.
2.The Retest: Following the breakout, prices retraced back to the level of the previously breached resistance. This pullback is a crucial component of the Break & Retest pattern, providing traders with a chance to confirm the legitimacy of the breakout.
3.The Reversal: The confirmation of the Break & Retest pattern came on Thursday when a bullish hammer candle formed. This reversal candle is indicative of the broken resistance now acting as support, aligning perfectly with the principles of the Break & Retest pattern. The market then pushed higher on Friday.
GBP/JPY Daily Candle Chart
Past performance is not a reliable indicator of future results
Trading the GBP/JPY Break & Retest:
Identifying and Anticipating: Traders who had identified the key resistance level in GBP/JPY prior to the breakout were well-positioned to anticipate the development of the Break & Retest pattern. Utilising price alerts would have been particularly beneficial to notify traders of both the breakout and the subsequent retest.
Entry Points: The entry point for a bullish scenario involves strategically placing an entry order just above the high of the reversal candle. This ensures that traders enter the market with confirmation of the newfound support.
Stop-loss Placement: Proper risk management is crucial. In a bullish scenario like this, a stop loss could be positioned below both the low of the reversal pattern and the broken resistance level, protecting against unexpected downturns.
Price Targets: Traders have the flexibility to set a price target based on market structure or risk. With the GBP/JPY Break & Retest, targeting the next key level or support based on market structure, or opting for a price target twice the size of the risk, could be considered.
Risk Management:
As with any trading strategy, risk management is paramount. Traders engaging with the GBP/JPY Break & Retest pattern should implement proper risk management techniques, including position sizing, staying informed with the economic calendar, and diversifying their trading portfolio.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.
Here’s the three key components of GBP/JPY’s Break & Retest pattern:
1.The Breakout: On Tuesday, GBP/JPY made a decisive move higher, breaking above a significant resistance level.
2.The Retest: Following the breakout, prices retraced back to the level of the previously breached resistance. This pullback is a crucial component of the Break & Retest pattern, providing traders with a chance to confirm the legitimacy of the breakout.
3.The Reversal: The confirmation of the Break & Retest pattern came on Thursday when a bullish hammer candle formed. This reversal candle is indicative of the broken resistance now acting as support, aligning perfectly with the principles of the Break & Retest pattern. The market then pushed higher on Friday.
GBP/JPY Daily Candle Chart
Trading the GBP/JPY Break & Retest:
Identifying and Anticipating: Traders who had identified the key resistance level in GBP/JPY prior to the breakout were well-positioned to anticipate the development of the Break & Retest pattern. Utilising price alerts would have been particularly beneficial to notify traders of both the breakout and the subsequent retest.
Entry Points: The entry point for a bullish scenario involves strategically placing an entry order just above the high of the reversal candle. This ensures that traders enter the market with confirmation of the newfound support.
Stop-loss Placement: Proper risk management is crucial. In a bullish scenario like this, a stop loss could be positioned below both the low of the reversal pattern and the broken resistance level, protecting against unexpected downturns.
Price Targets: Traders have the flexibility to set a price target based on market structure or risk. With the GBP/JPY Break & Retest, targeting the next key level or support based on market structure, or opting for a price target twice the size of the risk, could be considered.
Risk Management:
As with any trading strategy, risk management is paramount. Traders engaging with the GBP/JPY Break & Retest pattern should implement proper risk management techniques, including position sizing, staying informed with the economic calendar, and diversifying their trading portfolio.
Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.01% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money.