Ascending Triangle and Price/Oscillator Divergence in GBP/JPY

[DannyBly1]

Looking at the daily GBP/JPY chart we can see that it found resistance at the horizontal trendline of it's ascending triangle pattern.

The divergence between the uptrend in price and the downtrend in the RSI momentum oscillator suggests a possible bearish reversal.

Chart courtesy of Oanda

 

[Lucrum]

Personally I don't think there is an ascending triangle on that chart.
But even IF there is, it's usually a bullish price pattern.

http://www.chartpatterns.com/ascendingtriangles.htm

 

[DannyBly1]

I think you're right in that in the case of an ascending triangle you should expect the breakout to the upside to have more follow through because you are in the context of an uptrend.

However, I don't think it's bullish until price breaks out above the horizontal trendline.

A failure to break out above resistance along with slowing momentum could make a good low risk short entry (placing the stop just above resistance), with bearish confirmation if price can break through the lower trendline.

In this case both trendlines are well defined in that they have been tested multiple times, so I'm not sure why you think the pattern may not be an ascending triangle - not that it really matters, I think an ascending triangle on it's own means very little - rather, the support and resistance levels of the trendlines and how well defined they are is what I look for.

 

[Lucrum]

Quote from DannyBly1:

...In this case both trend lines are well defined in that they have been tested multiple times, so I'm not sure why you think the pattern may not be an ascending triangle...

Truth is I don't like either TL, but especially the upper one. Too many swing highs that are ignored. IF anything you might have a shallow rising channel.

Of course this is one reason I no longer draw TL's or look for such patterns to begin with. Just too much subjectivity.