GBP/JPY Price Analysis: Bullish Reverse H&S, 1:2 R/R mkt order, 1:3 R/R ext

As per the start of the week's, The Chart of the Week, GBP/JPY has moved into position for bulls to take advantage of in real-time. 

The following illustrates the trade set up from top to bottom in a continuation of yesterday's analysis:

• The Chart of the Week: GBP/JPY bulls expecting upside extension

Weekly chart's observation

On Monday, we noted the opportunity from the weekly support and the likelihood of an upside extension to fill in the weekly wick from a daily chart perspective.

So far, so good

So far, so good with the new weekly well on its way. 

Daily chart progress

Before:

After:

The above illustrates a meanwhile 1:2 risk to reward target.

4-hour chart progress

Before:

After:

As can be seen, the price has moved into a bullish expansion territory which would be now expected to develop into a bullish trend. 

Bulls may have already taken the opportunity to buy the market given the bullish environment. 

Those who have missed the New York lows can opt for extra confirmation in forthcoming 4-hour candles with MACD finally crossing above zero in current trade. 

There are a couple of ways to play this for a 1:2 risk to reward ratio:

1. Either a buy limit order can be positioned for a discount below the current market with a stop loss well below the recently made lows with a target in the 140.30 area, or;

2. With the same target, bulls can buy at the market with a market order using a tighter stop below the lows for a 1:2 risk to reward ratio and high probability set-up.

The risk is that the market bolts and doesn't provide any discount, so for an example, we will go with Option 2 and buy at market:

Market order for 1:2 R/R

(Error: The chart says it is a 1:3 R/R, but it should say 1:2 R/R).

As illustrated, the price is above the 21-moving average, (bullish) and MACD has just crossed the zero line, (bullish).

The stop loss can be placed below a 61.8% Fibonacci of the bullish rally, from the head of the Reverse Head and Shoulders (bullish) to the current highs. The stop is also protected by the right-hand shoulder (RHS).

This offers a 1:2 risk to reward in a high probability setup.

A 1:3 target is higher up in the 141 handle:

Committed bulls target 141.20

As an update, the price reached the 1:2 target. 

The price action is, so far, at the time of writing, leaving a wick that on the lower time frames would be expected to be filled in by a bullish price surge. 

Support is expected to hold between 139.50 and 139.85 from which the next correction would be expected to result in a continuation to the 1:3 R/R target.