I am fully aware of the risk that sequels tend not to be as good as the original (Rocky comes to mind), but I could not resist putting this pair on my watch list again. As my last two publications on this one (see links under Related Ideas) left me with a good amount of pips, I thought I would try to cash in again. I therefore present to you the new installment in the EURJPY series: Consolidation Mode Part III. This pair has been ranging around the key structure kevel of 135.14 for almost 27 days. Despite the mixed Euro data that came out this morning, price drove up 70 pips, so after breaking the key structure level to the downside last Thursday, price is now approaching it again from below.
On the technical side, we can see the contour of a bearish Bat on the hourly timeframe that completes at the mentioned structure level. Price comfortably passed the B point this morning and progressed 55% towards the potential reversal zone (PRZ). When defining the PRZ for a Bat pattern, we look at the projection of three harmonic levels. I: the 886 retracement of XA, II: an extended AB = CD pattern (in this case 1618 AB = CD) and III: a BC expansion (in this case 2618 BC). This defines a clear and tight zone, about 20 pips wide, represented by the orange lines in the chart. The key structure level at 135.14 lies smack in the middle of this zone, increasing the odds on a reversal.
Should the price climb enough to test the PRZ, stabilise and reverse convincingly, I would enter short. SL goes 10 pips behind X. Normally, I look for TP1 = 382 retracement of AD and TP2 = 618 retracement of AD, but in this instance I have placed them both a little higher due to structure support levels.
There are 101 pips to be made (if this pair follows the script) and the trade has a reward – risk ratio of 3.1!
UPDATE: The pattern did not complete, so I did not enter any trade. No problem, nothing was risked and nothing was lost. On to the next trade!
This looks very familiar to me ... how shameless of you to publish this ! :P
JazzForex
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Haha if you don't trade B´s under 50% retracement, I do as I follow Carney his rules. Thank you for pointing this one out to me in chat earlier today.
Nico.Muselle
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You're very welcome my friend, by the way I'm currently trading the BAMM :)
JazzForex
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You don't trade the pattern but you trade the BAMM? I hope you backtested that properly or Alexander might come here to have a word with you about that lol.
Nico.Muselle
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Backtesting ... that's for sissies ... I forwardtest ! ;)
JazzForex
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Lol you da man!
Nico.Muselle
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I can afford it ... as I'm still on demo :D
JazzForex
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UPDATE: The pattern did not complete, so I did not enter any trade. No problem, nothing was risked and nothing was lost. On to the next trade!
moneymaking
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Hey Jasper, very reasonable trade to take. I just wanted to ask you that is it better to place stops couple of pips above X point or above the high of the big red candle, which is at 15 hour on Feb 24; based on the x-axis? Providing that I am willing to risk as much as you would on this trade. Thanks for sharing and Good luck!!
JazzForex
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Thanks. The Bat pattern fails if price trades beyond (in this case above) the X level, so there is no need to place the stop loss yet another level higher, it would just increase your loss in case of an invalidation after you entered the trade. My current risk would be 33 pips.