A front-page item today in The Wall Street Journal said that bearish bets against the British pound have hit a record. Since the bettors are probably the same yo-yos who bet against the yen ahead of Japan’s last stimulus package (see my yen tout below, which got it right), it’s worth taking a look at the pound’s chart to see where we might step in and fade them. Actually, it looks like the yo-yos are on the right side of the bet, at least for now, since there’s an unfulfilled Hidden Pivot target down at 1.2246, an approximately 5.3% drop from these levels. A ‘mechanical’ short from the red line would take a 1.3424 stop-loss, but if this sounds too scary, I’d suggest using a ‘camouflage’ entry to cut the risk. That would imply initiating the trade using a downtrending abc pattern on the three-minute (or so) chart if and when the futures rally back up to the red line. Incidentally, 1.2246 would be a back-up-the-truck spot to try tightly stopped bottom-fishing in this vehicle. _______ UPDATE (August 19, 1:29 a.m. EDT): As it happens, the futures have tripped a ‘camouflage’/’counterintuitive’ buy signal tonight at 1.3150, based on the pattern shown (see inset, a new chart). The longer-term prognosis is still bearish, but it looks like shorts will need to get hacked to death and turned into fertilizer before this rally subsides.
