One of the main trading ideas of my radar for the week ahead comes on the EURJPY. Following an impulsive bullish move to start October, we've seen the market create a sideways consolidation pattern. This is a combination that forms what's called a "High & Tight" flag formation and it's one of the most powerful breakout patterns in the market. For me personally the only thing stopping this from being a grade a setup is the fact that if you look left on a higher timeframe you'll notice that we are currently trading AT previous structure resistance where a VIOLATION of would have been ideal. Nonetheless, this is still a good setup in my opinion.
In the YouTube video walking you through this idea (Preparing To Trade Breakouts) I share with you 3 ways to attack a breakout pattern, but for the purposes of me simply writing less let's concentrate on entring at the bottom of the channel.
On the last test of the channel lows price created a double bottom pattern which essentially means it tested the level twice and held twice before breaking higher. If price were to retest that level once again we'd have something that I like to call a 2618 setup which would provide another reason to get long at the lows.
PROS - The benefit of entering at this level as you can probably see is the quality of risk to reward. Not only can you take a conservative initial target at still maintain a close to 2:1 ratio but if you're playing for the breakout as well (or with a partial position) then the opportunity is that much better given the very low risk.
CONS - At this point, we have no confirmation that the breakout will happen so it's slightly more risky in comparison to a trader who takes the approach of waiting for a confirmed breakout.
I hope you guys enjoyed this trading idea and as always I'd appreciate it if you hit that "like" button as well as share any opinions or analysis that you may have relating to this pair or setup.
The duration of the Flag is just as long as the duration of the pole, that is not a good sign, I do not see the urgency in pushing this upward from the market participant. Even if it manage to break out of the consolidation period, it will most likely pull back so there is no point to get in before it actually break, my two cents.