Ascending triangle breakout, A medium term loot at the GBPJPY rate

The GBPJPY hit a low back and the start of October 2016 and since then we have seen a reversal back to the resistance level tested back in December and May. We have now had the resistance area tested on multiple occasions during the uptrend with the trading range getting narrower.  If the market breaks out of this pattern are we going to see a strong move upwards?

Due to the narrowing range, an ascending triangle has formed with clearly defined edges topping out around the 148 level. According to chart theory, this pattern is considered a continuation pattern and there is a higher likely hood that the price will break through and continue to trade higher. This gives technical traders a clear entry point above this level and as a break of the level to the upside could lead to further appreciation. When placing the stop loss, a trader will look to locate in back within the triangle. 

Once the breakout has occurred, to find the price projection you need to measure the widest distance of the pattern and apply it to the resistance breakout level. Many traders would look to do shorter take profit distances to increase the probability while still maintaining a high-risk reward ratio.

As we still have some time before the wedge comes to the end we could see a movement back down to the lower trend line which could play out over the next month. In this case, some traders may look to go short in the short term with a tight stop loss above the resistance level.

Happy trading

Alexander Flood

Technical Analyst

www.fxtradingstrategies.net

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