On December 9th we published “GBPJPY: What Is Next After The Target?” to show you two equally probable scenarios, which contradict one another. In other words, we admitted we did not know what was going to happen in GBPJPY next. However, we knew the exact moment when one of the two counts would be confirmed and become our primary one. And that is enough knowledge for a trader. The chart below shows how GBPJPY looked like more than 20 days ago.
As visible, this count suggested we should expect a strong sell-off in wave 3 of (3) to the south. But in order for it to be confirmed, the pair had to fall below the bottom of wave 1, which means lower than 183.70. Until then, we had to simply stay on the sidelines, because the other possibility was highly bullish. The next chart shows how the situation developed as well as how waiting for confirmation pays off.
We did not have to wait long. In fact, GBPJPY fell below 183.70 and activated the above-shown bearish count on the very same day. From then on, there was only one way for GBPJPY to go – down. On Monday, December 29th, GBPJPY plunged to as low as 178.11. A 560-pip decline in just 20 days. This is a good example of the Elliott Wave Principle‘s ability to prepare you for more than a single scenario. In fact, this might sometimes be a disadvantage, especially if there is controversy. But, and that is the most important thing, it provides key levels, which, if breached, would invalidate one and confirm the other count, thus giving you a clear idea of what to expect next.
Currently, it looks like wave 3 is over and wave 4 up is in progress. The resistance near 180.00 is likely to end the bulls’ ambitions and give the start of wave 5 down.
