Two days ago, on December 7th, we published “GBPJPY: Two Counts, One Direction” to prepare you “for a 220+ pip slump in GBPJPY”. While the pair was trading near 186.10, the Elliott Wave Principle suggested it was weaker than it appeared to be. There were not one, but two bearish wave counts, so we had no other choice, but to expect a slump soon. The next chart shows one of the two ideas.
If you have been trading this pair, you probably know what happened after that forecast. It took GBPJPY just one day to crash to 183.76 on December 8th, thus exceeding our target by 14 pips. An updated chart is given below.
As visible, the sterling has been recovering against the yen today. So, what does this mean? Well, things get complicated here, because the two counts, which helped us prepare for the latest sell-off, are not suggesting the same thing now. According to the first one, shown above, the pair is currently making wave 2 up of the larger wave (3) to the south. If this is correct, the bears are still in charge, as long as 186.34 stays untouched. But what does the alternate count say?
Triangles – contracting or expanding – are known to precede the last wave of the larger sequence. In this case, the larger sequence is the whole (A)-(B)-(C) corrective decline from 188.80 to 183.76. And corrections are supposed to be fully retraced, when the trend resumes. If so, sky is the limit for the bulls.
Right now, both scenarios are equally probable. In our opinion, the second one is preferable, as long as GBPJPY is rising. Count one would be safe to switch to, only if the pair falls below yesterday’s bottom again. A trader’s job is not to know, but to expect and stay prepared. You are now.
