Dont you just love speculation! More Speculation! haha =D
Well most can see the reasoning for the trade just by looking at the chart. After breaking the uptrend price made an aggressive plunge down to support, which then led to an aggressive short squeeze / dip buying back up to resistance outlined by the red resistance box. Buying power became exhausted which is evident by the small bodied green candles near resistance, followed by sellers starting to re-enter the market for another possible wave down ( Which formed a clean & strong doji candlestick at resistance, which is a bearish signal).
Another very interesting factor is that the current price action seems very similar to last years price action (Outlined by the box). In which price aggressively made its way up to the 189.50 area. Followed by price violently falling back down to support (outlined by green box), which led to an aggressive short squeeze / dip buying, back up to resistance (I would say roughly between the .786 / .886 Fibonacci retracement; outlined by the red box). The buying power started becoming exhausted once again (evidenced by the small bodied bull candles at resistance, and subsequent bearish dojis). In which price very aggressively plunged back down, slicing through support just like butter. Later finding support down at the 175.20-176.00 area, which started the next bullish wave higher.
Some notes to keep in mind:
The Trade:
A more conservative trade:
Cheers, good luck to all! =)
Another very interesting factor is that the current price action seems very similar to last years price action (Outlined by the box). In which price aggressively made its way up to the 189.50 area. Followed by price violently falling back down to support (outlined by green box), which led to an aggressive short squeeze / dip buying, back up to resistance (I would say roughly between the .786 / .886 Fibonacci retracement; outlined by the red box). The buying power started becoming exhausted once again (evidenced by the small bodied bull candles at resistance, and subsequent bearish dojis). In which price very aggressively plunged back down, slicing through support just like butter. Later finding support down at the 175.20-176.00 area, which started the next bullish wave higher.
Some notes to keep in mind:
- Any FX traders that were trading the Yen last year, might of read that the BOJ did announce that it will begin defending the Yen against the US Dollar around the 128.00 area (I remember not many people had read it, as it showed up in the middle of a large Wall Street Journal article; if my memory is correct). And price is near that area when in concern to U/J.
- Also, Pound pairs do have very impressive bull runs. But that also leads to pretty impressive pullbacks in currencies paired with the pound. Catching a lot of people buying the tops in these bull runs, which also adds to the violent drops due to buyers getting stops triggered left and right. The same goes for sellers getting short squeezed, by volatile bull runs.
The Trade:
- Short 2 Lots
- 1st Target is at the .382 Retracement of the bullish wave.
- 2nd Target is near previous support (I prefer not to place the 2nd target exactly at prior support/resistance because many times price will get near it only to reverse without the 2nd targets getting executed).
- Stops are slightly above resistance to account for any volatility / stop hunts. Upon reaching the 1st target, they will be moved to break even.
A more conservative trade:
- Wait for price to fall close below the lower wick of the doji (192.85)on a 4HR Chart
- Then move down to a 1HR chart wait for a retracement to the 192.85 area and go short upon receiving bearish price action confirmation.
- I can't tell you where to place your stops, as they would have to be based on the current price action if this scenario plays out.
Cheers, good luck to all! =)