GBP/JPY Prepare For Potential Bullish Trend
A potentially giant bullish move may be in the process of
forming for GBP/JPY. After analyzing price action, as well
as the RSI and MACD, since 1995 I noticed an interesting
pattern which now seems to be repeating for a fourth time.
I will try and explain the near 'chaos' in the chart as best as
I can in words so that it is clear, if not, please feel free
to ask for further clarification.
1) The first thing I want to focus on and explain is the RSI
and MACD. The red lines indicate bearish divergence. The
green lines indicate bullish divergence. And the blue lines
indicate convergence.
Every time since the initial bullish rally in March, 1995
a period of bearish divergence formed on the RSI and
MACD indicators when price was in a bullish trend. This
has always been followed by an abrupt crash to the
downside, which would only seem a logical response to
the bearish divergence.
After the drop, and whilst price was in a bearish corrective
phase, bullish divergence would form on the RSI and MACD
indicators, followed by a bullish rally during which period
both the RSI and MACD would form convergence as price
went up.
Once price broke out of the consolidation range, a period
of bearish divergence would start again as price moved
higher followed again by a steep drop. Currently we are
approaching the next cycle which will be August, 13
of this year, 10 years after the gigantic drop in 2008.
2) I believe that price is forming the next bullish channel
which should see price reach above 200.00 over the next
6-7 years, a bold claim I know, but looking at the price
action pattern since 1995 this may be realistic.
In particular, if you focus on the two columns highlighted
in turquoise you will see what I mean. After the sharp
drop in price in 1998, bullish divergence formed on the
RSI and MACD indicators, price dropped below the 100 &
200SMA but found support at the level from where it
rallied and closed above the 100 & 200SMA's in August, 1995.
Then price surged to the upside and closed above the
100SMA and dropped a bit to find support from it.
After a brief consolidation phase, the RSI and MACD
formed convergence and once price broke out of the
consolidation phase it closed above the 200SMA, and
both the 100 & 200SMA made a bullish cross over. If you
look at the RSI and MACD, you will notice that precisely
after the bullish cross over of the 100 & 200SMA, bearish
divergence started to form, again.
If you carefully look and examine price action in the
second turquoise column, you will notice that price action,
the 100 & 200SMA's and RSI and MACD are all forming the
very same - almost identical - patterns when price rallied
to the upside in Decembre, 2001.
I expect a sharp bullish rally therefore sometime around
August this year, when the next cycle line is reached.
Also, a drop to the downside seems highly unlikely now
that the 100SMA is sloping upwards and price bounced of
it twice already, including last weeks candle.
Another interesting parallel of price action currently
compared to the bullish breakout in late 2001, is that
the RSI formed a double bottom at the 42 level, and the
100SMA in 2001 was starting to slope upwards much the
same way as it currently is.
This analysis does not imply you start placing long orders
just yet, but it does reveal price action favoring bullish
momentum over bearish as long as price does not close
below the 100SMA.
Again, if you have any questions let me know.
Happy trading
forming for GBP/JPY. After analyzing price action, as well
as the RSI and MACD, since 1995 I noticed an interesting
pattern which now seems to be repeating for a fourth time.
I will try and explain the near 'chaos' in the chart as best as
I can in words so that it is clear, if not, please feel free
to ask for further clarification.
1) The first thing I want to focus on and explain is the RSI
and MACD. The red lines indicate bearish divergence. The
green lines indicate bullish divergence. And the blue lines
indicate convergence.
Every time since the initial bullish rally in March, 1995
a period of bearish divergence formed on the RSI and
MACD indicators when price was in a bullish trend. This
has always been followed by an abrupt crash to the
downside, which would only seem a logical response to
the bearish divergence.
After the drop, and whilst price was in a bearish corrective
phase, bullish divergence would form on the RSI and MACD
indicators, followed by a bullish rally during which period
both the RSI and MACD would form convergence as price
went up.
Once price broke out of the consolidation range, a period
of bearish divergence would start again as price moved
higher followed again by a steep drop. Currently we are
approaching the next cycle which will be August, 13
of this year, 10 years after the gigantic drop in 2008.
2) I believe that price is forming the next bullish channel
which should see price reach above 200.00 over the next
6-7 years, a bold claim I know, but looking at the price
action pattern since 1995 this may be realistic.
In particular, if you focus on the two columns highlighted
in turquoise you will see what I mean. After the sharp
drop in price in 1998, bullish divergence formed on the
RSI and MACD indicators, price dropped below the 100 &
200SMA but found support at the level from where it
rallied and closed above the 100 & 200SMA's in August, 1995.
Then price surged to the upside and closed above the
100SMA and dropped a bit to find support from it.
After a brief consolidation phase, the RSI and MACD
formed convergence and once price broke out of the
consolidation phase it closed above the 200SMA, and
both the 100 & 200SMA made a bullish cross over. If you
look at the RSI and MACD, you will notice that precisely
after the bullish cross over of the 100 & 200SMA, bearish
divergence started to form, again.
If you carefully look and examine price action in the
second turquoise column, you will notice that price action,
the 100 & 200SMA's and RSI and MACD are all forming the
very same - almost identical - patterns when price rallied
to the upside in Decembre, 2001.
I expect a sharp bullish rally therefore sometime around
August this year, when the next cycle line is reached.
Also, a drop to the downside seems highly unlikely now
that the 100SMA is sloping upwards and price bounced of
it twice already, including last weeks candle.
Another interesting parallel of price action currently
compared to the bullish breakout in late 2001, is that
the RSI formed a double bottom at the 42 level, and the
100SMA in 2001 was starting to slope upwards much the
same way as it currently is.
This analysis does not imply you start placing long orders
just yet, but it does reveal price action favoring bullish
momentum over bearish as long as price does not close
below the 100SMA.
Again, if you have any questions let me know.
Happy trading