USDJPY short entry after valid trend like break

FX:USDJPY   U.S. Dollar/Japanese Yen
1054 11 13
USDJPY             was unalbe to break higher in November and retreated from the 123,50 level as BOJ doesn't increase its bond buying program. There is a clear trend line break on the 4h chart, natural stop loss level is close for a good risk -reward short trade. Previous high and moving average give my target for the trade, moreover the real driver of the pair EURUSD             seems to get lost its momentum.
Congratulations! Your chart has been selected to be highlighted as the post of the day! This is a great use of trendline analysis, to setup a breakout trade.
adam234 walker.england
Great chart! But for a short entry, personally, I would wait for a close below the previous low at 122.224. Just in case this turns into a trading range.
Gummibear PRO Gummibear
What I wanted to say: You are right to assume that with the break of a trendline, the previous uptrend is indeed broken and no longer "valid". But from my point of view, it is premature to conclude that a new trend down has started. For a new trend down to be confirmed, you want to see lower highs and lower lows first. After one trend ends, before a new trend starts, there can be a phase of sideways, range-bound price action.
adam234 Gummibear
I agree with you. I consider breaking below 122,75 which was a low of 20/11 at 2pm, is a lower low. I still keep my position and deem the break a valid change of the minor trend .
You are right, of course, and USDJPY broke its uptrend, for sure. Btw, you could draw your trendline a bit differently (a bit steeper), so the last touch is at the 122.220 low on Nov 15. Then the trendline break would have occured earlier, and the high at 123.260 on Nov 23 could be seen as a backtest of that broken trendline. This backtest would have a been a more agressive short entry, with a first (small) profit target near the previous lows of 122.220. So far, price seems to bounce off this level. Anyway, there are many different valid strategies... Personally, I have been burned too many times by the concept of "trend change", with the assumption that as soon as one trend ends, another trend has to start. To the contrary, I found that in many markets, price spends more time in sideways consolidations then in trends. Please keep up your great work with charts.
Most likely, this trade will be a win although there will be a little drawdown of around -60 to -70 pips but I don't think it will hit your SL
stopped out
Sorry to hear that. Too bad, as today USDJPY finally managed to break down through that 122.200 level. Just out of curiousity: in hindsight, what would you do differently the next time around, in a similar setup?
adam234 Gummibear
I would take a smaller position and apply a stop which is above the tops, in this case 123,8
Makes sense... In hindsight, your analysis of the setup was really good, even your initial target was hit today (bottom of green zone). But this setup was also a great example for how long price can stay in a trading range sideways after breaking the trendline. In this rangebound phase, you can see how the previous lows (122.220) were tested several times, and then the highs were tested as well, before the range finally broke to the downside.
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