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Short

USDJPY - Head and Shoulders Daily Chart in Play

FX:USDJPY   U.S. Dollar/Japanese Yen
2030 28 52
Greetings Fellow Traders,

USDJPY             as previously mentioned this week had broken a key technical level that has been aiding in support for the last year. After this break, the market proceeded to sell off by over 500 pips before recovering some of the damage at the end of the week. What I did not mention in that analysis as it was not needed at the time was what else the Key Technical level of 116 was acting as, the neckline of a Head and Shoulders Pattern that has been forming since very late in 2014. Head and Shoulders is a reversal pattern, they require a preceding trend, USDJPY             has been in a bullish trend since 2012.

The Measured Objective of this particular reversal pattern is done by calculating the distance between the peak of the head, and the neck line itself. In this case it amounts to very roughly 1000 pips. Coincidentally the moves over the last couple weeks have also amounted to 1000 pips. This puts the measured objective of this move at around 105-106.

The real trade for any Head and Shoulders pattern does not occur when the break of the neck line happens, it is executed when price returns to the neck line and is properly defended as a retest or power transfer. I mention this because I do not want people to assume that because the neck line is broken that we are instantly going to drop to 105/106 this next week. Is it a possibility? Yes. However it is not likely, the market might be taking time to digest all the events that have transpired over the last couple weeks, consolidating, building power for a move lower.

In 2008, GBPJPY             had a picture perfect Head and Shoulders reversal trade, I want to illustrate that trade below so you can visualize partially what we may be looking for in this trade set up:
snapshot

The pre-emptive entry occurs when the neck line is tested. The confirmed entry comes after that retest when the bullish strength leading up to the retest breaks. It is also worth noting the amount of time that transpired before the actual trade took place. Over 6 Months. I'm not saying that this USDJPY             trade will take that long before executing but it's important to keep in mind. If I had to guess the drop in USDJPY             from 116 won't take place until at least March.

Here is another look at what has been transpiring with USDJPY             since 2012. We can see the Bullish Trend Strength breaking. Likely support is obvious and I've highlighted areas that the market will be looking at as well.
snapshot

Here is another look at USDJPY             only covering the last year, and again not taking into account the Head and Shoulders Pattern:
snapshot

I will be looking to sell USDJPY             when a retest of the neck line occurs near 116. Confirmed entry will be when the bullish strength leading up to that point breaks. Preferably there is a corrective/consolidation type structure that forms while that happens.

Keep an eye on it everyone. Feel free to comment/like/follow.
Comment:
snapshot


1 Hour overview for people thinking that last night's drop was the beginning. Also pay attention to the fact that 114-114.30 like several thought would bring the actual resistance didn't do much...the real resistance will be closer to 116
Comment: Another mid-week look at what I've got my eyes on

snapshot


Sells are possible from here - but a break above blue - gives the necessary confirmation to make a run at 116. I'm not surprised at all that this week hasn't amounted to much on UJ - still 2 days left though
I knew someone must have spotted the same idea as I published this:
USDJPY: Giant complex formation
+1 Reply
You are goddamn right!
+1 Reply
Bro', Now that GBPJPY has shown some recovery on Friday, considering the above USDJPY analysis, until what level can we expect GBPJPY pair to rise? And what's the ideal entry to short?
+1 Reply
Nice analysis, Synapse. Newbie to trading...but I'm already falling in love with the analysis and comments given. Thanks and happy trading
+1 Reply
Synapse PRO HumphreyNR
Hello and Welcome HumphreyNR! Glad to see you start getting involved with trading. It truly is a tremendous investment opportunity for all levels. There are many things I wish I could go back in time and tell myself about trading over 8 years ago when i first started getting involved. Patience and flexibility is key. Risk management is far more important than money management. Keep an open mind and find what works for you personally...there is no one and only way to succeed. Feel free to ask questions and good luck!
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HumphreyNR Synapse
Thanks bro. Well taken.
+1 Reply
Nice...
+1 Reply
Totally RADICAL DUDDDDEEEEE
+1 Reply
Synapse PRO NickCoulby
Cowabunga!
Reply
Nice
+1 Reply
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