As you see from my last post on usd/jpy the price tested every line we had marked in the PRZ (potential reversal zone) of our gartley pattern and then went down hitting our target 1 and target 2. This has led us nicely into a potential bat pattern. The C leg retracement of A to B is slightly deeper than i would of liked as generally i would consider 0.886 as a maximum but the most important leg is the B and D. The D leg 0.886 retracement of X to A lines up almost perfectly with an 1.618 extension of A to B and an inverted 1.618 extension of C to B. This also is within the large support zone marked in blue.
Our stop loss would potentially be at the purple dotted line below X
Based on an estimate of a potential risk/reward for this trade i have taken the centre point of my 0.886 retracement and my two 1.618 extensions. Target 1 would be at the 1st pink dotted line (notice how this lines up nicely with support at the D point). (0.382 retrace of A to an estimated D)
Target 2 is our second pink dotted line again notice the line up with resistance above the X leg. (0.618 ret of A to potential D)
Target 1 would give us a 2.25 risk reward which if hit then stops would roll up to break even. If target 2 was hit we would have a 3.5 risk reward.
Of course the market could just rraleigh from here or it could come down and punch through our support zone. The important thing is to look at price action within our PRZ
Happy trading!
Our stop loss would potentially be at the purple dotted line below X
Based on an estimate of a potential risk/reward for this trade i have taken the centre point of my 0.886 retracement and my two 1.618 extensions. Target 1 would be at the 1st pink dotted line (notice how this lines up nicely with support at the D point). (0.382 retrace of A to an estimated D)
Target 2 is our second pink dotted line again notice the line up with resistance above the X leg. (0.618 ret of A to potential D)
Target 1 would give us a 2.25 risk reward which if hit then stops would roll up to break even. If target 2 was hit we would have a 3.5 risk reward.
Of course the market could just rraleigh from here or it could come down and punch through our support zone. The important thing is to look at price action within our PRZ
Happy trading!