GBP/JPY @ the London Open

After 3 hours of sleep the night before, I passed out earlier tonight, so I woke up (circadian rhythm in time with the market, I guess) just as London was about to open and decided to stick around to see how my trades fared through the initial part of the session. It’s time to go back to bed, but thought I’d get a couple Guppy charts posted beforehand.

It turns out that Ichimoku Kinko Hyo analysis (see post just previous) wasn’t half-bad, and I was able to bag a few hundred pips all told. The technical picture derived from IKH hasn’t changed (which means nothing has arisen to challenge further validity of the current uptrend, as yet), but I did decide to take off my long to trade some of the interstitial moves the IKH chart @ an H3/H4 or D1 timeframe doesn’t present.

One example is a short off of 210.65 taken here. Currently up 165 pips and encountering support @ the 209 level. This area acted as staunch resistance until breached yesterday around this time, and seems to be holding so far; but the short remains on for the time being.

One misgiving about the larger long picture is that the advance to 210.65 was some 170 pips above the horizontal resistance on the ascending triangle noted last post (white line reflected above), now completely retraced. Failed breakout, or will we see a bounce off of support and fulfillment of the pattern?

For now, you can see price bouncing off the lower end of the 38.2% retracement level (dotted yellow line toward top of chart) from 239.89 to 192.49 @ 210.65. Price is challenging the speed line off the top fib fan (red lines in middle of chart) which happens to coincide with the 209 area as well. Is a break in the offing? If not, we’ll see a retest of 210.65.

Now for the updated IKH daily:

Again, nothing new here: the bullish Tenkan/Kijun cross (dark blue/red lines) on May 23 has been validated (over 500 pips from there to today’s top); price as obviously retraced a significant portion of that move, but nothing present to negate the cross. Tenkan, as you’d expect given it’s short periodicity, has experienced a significant downturn on the H1 and H3/H4, but no crosses and remains above the kumo (which negates the force of bearish crosses, in any case).

+182 on the Guppy. Also EUR/USD +49, GBP/USD +47, USD/CHF +27, CAD/JPY +25. Not a bad couple of hours. But there may be a shark lurking in my dreams.

And now I’ll turn in again….

Edit: Apparently I was still tired – I forgot to post this when writing it. Well, better late than never. Fortunately the pip counts listed on the above trades are all higher (with the exception of CAD/JPY, which stopped out @ BE).

The Itchy Guppy: GBP/JPY Analysis using Ichimoku Kinko Hyo

That’s a bit of a misnomer, but I altered the spelling to make it seem like a pun. Yes, a towering wit is on parade this afternoon, ladies and gentlemen.

Here’s GBP/JPY on the daily overlaid with Ichimoku Kinko Hyo where all aspects of IKH are aligning to signal further upside.

Some of what follows will seem obscure if you’re unfamiliar with IKH, which can be remedied by reading the first two segments of the Ichiwiki. I also am unfamiliar with IKH, but I now know the Japanese vocabulary for its features, so I will masquerade as a sophisticated analyst who is in fact only a charlatan exploiting the relative ignorance of those reading concerning the topic discussed.

• To begin with, something non-IKH specific: an ascending triangle (two straight white lines) from the pair’s mid-March nadir is well into it’s consolidation. The horizontal line marking resistance in the 209 area has been touched and rejected the advance three times over the last two months; but conditions are improving for a break.
• The cloud, or kumo of IKH is a shaded area bounded by two lines, Senkou Span A (SS-A) and Senkou Span B (SS-B). SS-A covers fewer periods of data (half as many as SS-B), so it is the faster line, behaving similarly to a stochastic oscillator. As you can see, SS-A (green) crossed SS-B (yellow) on May 20-21, shifting the kumo’s bias upward. Notice that a bearish (yellow) cloud was present on the two touches from mid-April and early May, but not from May 30. Meanwhile, the ascending triangle continues to consolidate.
• The Chikou Span (light blue line), which shifts the most recent closing price back 26 periods to represent current price v. historic price, is higher than the price exhibited where the Chikou Span ends; also indicative of further upside potential. Note though, that the Chikou has, with the exception of May 30’s flukish blip above 209, found resistance along the dashed green line just shy of 208.
• The other two lines that make up the overlay are the faster blue (Tenkan-Sen) and slow red (Kijun-Sen) lines. A classic strategy used by IKH practitioners is the Tenkan-Kijun crossover, which are in no short supply across the chart. The one of primary interest is the latest cross from May 23. The bottom-up cross of Tenkan over Kijun is considered a strong bullish signal because it occurred above the cloud. Notice how price has found support at the top of the cloud by SS-A since that point.

In sum, the technical picture that arises from IKH on the Daily is a bullish one, but subject to confirmation on a breakout from 209, or even a sustained close above 208.41 (the 23.6% fib retracement of 212.77 to 194.36 – not pictured above). I’ve been playing contrarian in the short-term against this medium/longer-term corrective leg from 192 after the decline from 252, but watching to see what plays out. Will it be a resumption of the trend down after more stalling @ 209, or will price advance above 209 and then the 213 region to negate the corrective scenario in favor of a fresh trend upward?

Ichimoku Kinko Hyo

What? I’m modestly ashamed to admit it, but on occasion I’ve plotted this overlay on a chart out of curiosity, only to take it off within 10 seconds because of how hopelessly complicated interpreting it appears.

I’m notorious (among a tiny, elite cabal of traders moonlighting as laundromat attendants) for wrecking my charts with moving averages (limit of 3, really) trendlines of all kinds, and fibonacci studies (fans w/speed lines and retracements typically, but also arcs and expansions, and when I plot different series over top one another…well…). I’ve always had a limited fascination with indicators (which is why I like using Metatrader for reference and testing, but don’t find it necessary or even preferable when trading), preferring price action and line studies; but do use RSI, ADX regularly and sometimes MACD and/or Williams’ Awesome Oscillator. Anyway, I’m no architect, but no slouch either when it comes to drawing intelligible lines and knowing my around them.

But what is this garbled monstrosity?

That’s Ichimoku Kinko Hyo (Japanese for “Equilibrium Chart At a Glance”); and only laid over naked price. Here’s what it looks like with some of the aforementioned studies tacked on:

Positively mayhem. Fortunately the purpose – if not the underlying data – of a lot of those non-IKH lines is redundant on IKH itself, so keeping it all together in one chart isn’t necessary. I prefer to run multiple charts at once anyway, separating different studies for clarity.

In a quick re-read of Ed Ponsi’s Forex: Patterns & Probabilities (a good primer for novices, if a bit limited for those more experienced) the other day, I came across a reference to widespread use of IKH by Japanese traders on Yen crosses. Guppyphile that I am, my chart study wanderlust was aroused; and so I set off to finally become acquainted with IKH, scary greenish-yellow poisonous nuclear fallout cloud-looking things floating on my chart be damned.

My search turned up some fascinating information, mostly on the single best site (in English) for IKH information: Kumotrader.com’s Ichiwiki.

There’s nothing of real value I can add here that isn’t already located there; have a look if you’re interested…. As it turns out, those lines and that “cloud” (kumo in Japanese) are very comprehensible (no noxious gases or DNA-mutating radiation, either) and, at least tentatively, look to be an excellent addition to the toolkit. I’ll be reading about and tinkering around with it for a little while, in any case.