Tonight we see GBP/JPY testing a down trendline that has been in place on the daily chart since September 08, though the pair has been in a downtrend since mid-2007.  Since the predominant trend is down, I'm looking for a short opportunity.

The 4 hour chart below shows how the trendline has been tested multiple times in the past month.  After retracing steadily over the past week back towards the declining trendline the pair has shown signs of indecision and the possibility of resuming the downtrend.  We have a doji two candlesticks back from the current 4 hour candlestick that just kissed the trendline, and the bars following have been down.

So, I'm looking to short on a break below the low of the current 4 hour bar.  I think we may be heading down, but as always, I could be wrong.

• Short Entry:  127.48
• Initial Stoploss:  129.70

Edit 1/29/2009 7:45 PM:  My short entry order was hit last night, so I'm on board for the ride down - if it happens.  The pair popped up again and tested the trendline again today, but since my stop is above the recent swing high, I wasn't forced out.  Tonight we see GBP/JPY falling again, though, so hopefully we'll see a decent move down.  If it moves far enough in my favor, I'll move my stop down.

Edit 2/1/2009 1:50 PM:  Unfortunately, GBP/JPY broke through the down trendline on Friday, forcing me out for a 1R loss on both halves of my short position.  I don't think that I really did anything wrong here - I followed the predominant trend; it's just that in this case, the pair respected the rising trendline on the shorter timeframe and violated the falling trendline that I was counting on on the longer timeframe.  So now that I've been stopped out, I move on to the next trade.  The breakout through the falling trendline will provide a good opportunity to establish a long position in this pair if we see a decent pullback following the breakout.