The main criteria for me in trading is structure by means of impulse and correction. An impulse has 5 inner waves and a correction has 3 inner waves. However there are several degree's within a structure and that's why it might be hard to analyze an extension of a structure. Those who follow my posts from the beginning probably already know how I look for the 'HIGHEST' probability trade. There are no rules, only experience and guidelines. And I like to share such a guideline for the EURJPY. The EURJPY is very interesting at the moment and in an extension. On the daily time frame I count an ABC structure lower where wave C is currently in progress.
As I mentioned an impulse has 5 waves including the inner waves for an extension results in 9, 13, 17 waves etc. Since we see many overlaps it is unlikely that the EURJPY is in an impulse lower. Therefore I favor a correction lower by means of a wave C. However a correction has 3 waves and including inner waves for an extension results in 7, 11, 15 etc.
This is 'among other reasons' why I favor at least one more leg lower, I like to see a corrective structure in line with a corrective extended wave count. This is why I'll be looking for a reversal soon for a new daily low.
For an example of my projection of GBPAUD that had a similar structure see link below:
It is crucial to understand that I'm not saying it has to make a new low, it will only increase the probability of a succesfull bullish break out once the correction is over. It also does not mean that it will only make 1 leg lower if it decides to move lower. The point is probability, short term the highest probability from my point of view is a new low. If we see otherwise I will adjust, in both cases updates will follow.
If you like my analyses and explanations of how I rationalize the market follow me for updates. Once my website is (finally) ready I will explain my approach in detail because structure is leading whether we like it or not. All trading strategies are a way to trade structure so understanding structure is key for every professional trader.
I'm short EURJPY from NFP publication last Friday. I explained why I favored a move lower and structure on lower time frames told me that a bearish move as a result of NFP was the most likely scenario (I therefore shorted by means of a pending order). We saw some smaller consolidation as well for possible entries as well. My trade is currently in profit for and closing in on my first target (125 zone) for a Risk/Reward of 7.5/1. Depending on structure I will take partial profit or not by means of closing 50% of my trade.
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I closed 50% of my short at 125 for a risk reward of 7.5/1. A bullish break likely will be the start of a correction which will present the next sell opportunity.
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EURJPY shows once again that trading is scenario analysis. I was and am looking for a new daily low. However I expected a pullback and decided to be conservative by taking 50% profit. Well overnight we saw another impulse lower which is good for my remaining 50% and precisely the reason why I left 50% on the table. However I will still be looking for consolidations to see whether I can add to my short towards 122.
updates will follow
Trade closed: target reached
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Conservative target has been reached for Risk/reward of 10/1. Based on daily candles (body) I already closed 50% as mentioned yesterday. However I think there is more to come but we need a consolidation before there might before I consider selling again.
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Last week I answered a question of BusinessInMotion:
'The Yen pairs moved very fast and especially when looking at last week's range, add to that the fact that this pair almost erased the whole move of March within the week. It is therefore likely that the Yen pairs need a break soon so they can consolidate. That's what I'll be looking for before I decide what my next trade will be. We see the first corrective leg in progress from the zone you mention so let's see whether it settles. Selling in this zone is not what I like to do.'
Now let's see whether my levels make sense (black horizontal dotted lines) for a possible target for wave C. I like to see at least 3 waves and then reconsider what's next. However short term I'll be looking for a buy continuation after a consolidation to target that zone.
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We saw the new low as this analysis suggested 17 days ago. Hope you guys profited, it was a fast and clean move with incredible risk/reward. I will update EJ later on when I spot the next big trade opportunity, which will likely be bullish.
Comments
chrisvos
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What is your view on nzd/jpy aud/jpy cad/jpy pairs? are you anticipating on downside?
TimStuyts
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I was looking what pair to update but since you ask I will post these three pairs later today with my analyses. In general I favor all three lower in terms of bigger picture. However I will post what to look for in terms of entries.
BusinessInMotion
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Hi there! Do you see a chance a consolidation at these levels (122.80)?
TimStuyts
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The Yen pairs moved very fast and especially when looking at last week's range, add to that the fact that this pair almost erased the whole move of March within the week. It is therefore likely that the Yen pairs need a break soon so they can consolidate. That's what I'll be looking for before I decide what my next trade will be. We see the first corrective leg in progress from the zone you mention so let's see whether it settles. Selling in this zone is not what I like to do.
BusinessInMotion
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Thanks Bro! I'm not selling yet; nevertheless, I have a large short PUT option @ 122 that expires on 13th.
BusinessInMotion
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Hat off! You are again right! Enjoy your evening!
glaazie
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what are your thoughts of the stucture eurjpy is forming right now
looks a bit on a bullflag to me but i have also seen that it can go down forming this kind of structure
many thanks
TimStuyts
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I think that this mornings update for a wave 5 is still valid and we might see a reversal soon. I'll update when we have a bit more price action.
redrose1234
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What u think about GBP/CHF IS going up r down?
TimStuyts
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I personally don't trade GBPCHF although it looks very nice for short term trading opportunities. I would be looking for a consolidation towards the upper minor channel line to see whether it break bearish again for a new low. If it break bullish I would wait for a consolidation and then buy. Nice structure for some clean trades. I will update EURGBP tomorrow since that looks very promising as well and that pair I trade a lot.