FxWirePro: Gravestone signals GBP/JPY’s down streak to resume – returns on active long puts in PRBS underway

With the below technical reasoning, we think arresting potential downside risks of this pair by hedging through Put Ratio back Spread and accordingly, hedging framework was also suggested, for now it is reckoned that the underlying currency GBPJPY to make a large move on the downside.

So, longs on 2 lots of At-The-Money -0.50 delta puts would function effectively. By now shorts side of 1 lots of ITM put option would have generated assured returns on the recent rallies, shortly longs on ATM puts are about to function that would take care of potential downswings.

Now, it is urged for some corrections on GBPJPY upon the formation of "Gravestone Doji" pattern candle on peaks of uptrend at around 183.926 levels on daily chart followed by a shooting star at 184.079. We now reckon that these bearish patterns have more downside potential and would reveal a medium term downtrend direction.

It is also important to emphasize that a hanging man candle pattern on monthly chart is a warning of potential price change, not a signal, in and of itself, to go short. Overall pattern on the pair fixes it bearish view for a target of 177.125 to 175 levels in medium terms.

We have already advised bearish trend in our previous articles as well on 2nd October and again on 7th, We stated to maintain the same strategy for hedgers by using these small bounces from then to help our ITM shorts, this would have certainly ensured returns in the form of premiums.  Hereafter, you can have a view on daily charts (the bearish signal spotted as you can see that from circled area, long put instruments to generate positive cash flows here onwards).