USDJPY: Playing The Consolidation

This was posted to my site earlier today:

Consolidation. It’s a term that strikes fear and dread into the hearts of many a trader. When you hear the word “consolidation”, automatically you picture prices just swinging back and forth. Drawing fast turning peaks and valleys like an EKG monitor attached to a guy suffering a panic attack after seeing a mouse! C’mon admit it! Some guys are afraid of mice! Not me, of course!

Well, if you want a textbook example of consolidation, you don’t need to look any further than this Daily chart of UJ! Just try to make sense of that! Tell me if you should buy or sell? Neither! At least not from this TF view, you can’t tell.

DAILY CHART

I call this Daily chart my master roadmap. I’ve been operating off this “roadmap” for months now following the projected path that I mapped out for UJ months ago. And prices have pretty much followed right along my projections. I still hold several short positions all the way from the highs back in August of last year. Yes, that’s right. I’ve been holding those short positions for 8 months now! But the point is that since this “roadmap” has so far served me so well, why would I deviate from it? I won’t. So let’s see what direction is it saying UJ should be headed next.

The prominent feature on this chart is an expanding triangle pattern (blue). This is a leading expanding triangle in that when it completes, it will lead to another large drop. And it’s not complete. Judging from the distance leg E must cover, this consolidation wave 4 has still got some ways to go before it’s done.

Don’t forget that there was also a COMPLETED Crab pattern that prices are still within its’ PRZ. So still looking for the profits targets on that crab.


4HR CHART

So I had a post on this pair before where I presented 4 possible scenarios. Here the link to that post: (B) USDJPY: When It Is A COMPLEX Correction…Boy! Do They Mean COMPLEX!. So in that post, I had a scenario that was rather more complex than the others. It was Scenario #3 in which I was suggesting that there could be a triangle in the X wave of a complex WXY pattern. Whereby wave Y would be a 5-wave move up. So now, I am favoring that scenario. It goes against the “KISS” theory in that it’s probably the most complex of all the scenarios I presented. But if that is what the chart says, then I’ll just go with it. For this scenario to be correct, prices need to respect the triangle although it can drop below the bottom TL of the triangle somewhat and still be ok.

If this triangle does hold true, then the next move is up in the wave Y. And it should be 5-waves up. Where it ends will determine whether this whole wave 4 consolidation will be a flat or a zigazag. But really, does it matter? Personally, I don’t care whether it is a flat or zigzag only to the extent that it can give me a clue as to where to look for the wave Y to end. For that, I’ve marked 3 levels that it could end. Ideally, it will be a zigzag that will go all the way up to the upper TL of the leading expanding diagonal where it will complete the leg E. Then LOOK OUT BELOW!

There is also a POTENTIAL Crab that is relevant to this scenario in that it would complete at the 1.618 extension.