My USDJPY trade idea has been in the making for the past 5 trading days, over a week now!
Its important though that as a trader you are willing to wait for the right criteria to be met, and to only enter the market on your terms... not the markets. So this is a matter of stalking the market and reaping the rewards later.
Ever since the JPY liquidity crash on January 2nd, the rising channel has supported USDJPY, this level has been strongly defended by the bulls, never more so than the past 5 days. I think the reason why is that if this level is broken, then there is considerable downside available to the bears, with little in the way of support.
So... Onto the setup. You should able to see the point of interest highlighted as the yellow box, showing us the daily Inside Candle setup. This isn't just any inside candle setup however, as it has now stretched to 4 inside candles inside the mother bar! This level of consolidation simply means the breakout could be even more powerful.
Because the Inside Candle Pattern is located on a key market level, it gives it relevance, I wouldn't be interested in trading an inside candle setup in the middle of nowhere with little market relevance. Also it gains further importance due to being formed on the Daily time-frame. All setups and candlestick patterns formed on the daily chart are significantly more reliable than lower time-frames.
To add even more confluence to the trade setup, you can see some further resistance that will be broken by the blue trend-line, any candle breaking the inside bar high, will also break this level. Equally any break to the downside breaks the long term trendline from 2nd January, simply meaning we can expect a big move following any breakout.
There are two ways to trade this setup. The aggressive approach would be to take your entry long when price breaks the high of the mother bar, or a short when price breaks the low of the mother bar. The conservative approach would be exactly the same but you only enter the trade once the candle has actually closed - this avoids the potential of a false breakout but also means you might miss out on some potential pips.
The targets for long trades will be the top of the rising channel.
The targets for short trades will be the next Daily Key Level around 109.000
Its important though that as a trader you are willing to wait for the right criteria to be met, and to only enter the market on your terms... not the markets. So this is a matter of stalking the market and reaping the rewards later.
Ever since the JPY liquidity crash on January 2nd, the rising channel has supported USDJPY, this level has been strongly defended by the bulls, never more so than the past 5 days. I think the reason why is that if this level is broken, then there is considerable downside available to the bears, with little in the way of support.
So... Onto the setup. You should able to see the point of interest highlighted as the yellow box, showing us the daily Inside Candle setup. This isn't just any inside candle setup however, as it has now stretched to 4 inside candles inside the mother bar! This level of consolidation simply means the breakout could be even more powerful.
Because the Inside Candle Pattern is located on a key market level, it gives it relevance, I wouldn't be interested in trading an inside candle setup in the middle of nowhere with little market relevance. Also it gains further importance due to being formed on the Daily time-frame. All setups and candlestick patterns formed on the daily chart are significantly more reliable than lower time-frames.
To add even more confluence to the trade setup, you can see some further resistance that will be broken by the blue trend-line, any candle breaking the inside bar high, will also break this level. Equally any break to the downside breaks the long term trendline from 2nd January, simply meaning we can expect a big move following any breakout.
There are two ways to trade this setup. The aggressive approach would be to take your entry long when price breaks the high of the mother bar, or a short when price breaks the low of the mother bar. The conservative approach would be exactly the same but you only enter the trade once the candle has actually closed - this avoids the potential of a false breakout but also means you might miss out on some potential pips.
The targets for long trades will be the top of the rising channel.
The targets for short trades will be the next Daily Key Level around 109.000
Trade active:
Since the last update, price broke the high of the inside candle and had a little bullish move to the key level zone.
BUT here it has then printed a 4 HR dojo, and an hourly pin bar rejection. If we look back on the hourly chart price printed nearly exactly the same on 7th march at the same level. That move had a strong bearish follow through and considering the bullish move has been quite weak off that rising trendline (printing a lot of consolidation before a slow move) I think that we should see a good bearish move here. Possibly even breaking the trendline and the turning the primary trend for this pair bearish.
I have opened a small short on this pair after the pin bar highlighted and will then look to add to this position if indeed the trendline is broken.
BUT here it has then printed a 4 HR dojo, and an hourly pin bar rejection. If we look back on the hourly chart price printed nearly exactly the same on 7th march at the same level. That move had a strong bearish follow through and considering the bullish move has been quite weak off that rising trendline (printing a lot of consolidation before a slow move) I think that we should see a good bearish move here. Possibly even breaking the trendline and the turning the primary trend for this pair bearish.
I have opened a small short on this pair after the pin bar highlighted and will then look to add to this position if indeed the trendline is broken.
Comment:
Since the last update, this pair has seen significant movement. We have seen a break below the trend line which could suggest much lower levels to come around 109.000! The next market move is going to be decisive i feel because after the break of the trend line, price is now retracing to approach a retest of the trend line as resistance now. Any rejection will give an opportunity to short the pair over a long term trade.
If price down recover and re enter the channel its been trading in previously then we can look to go long and target the upper barrier of this channel.
If price down recover and re enter the channel its been trading in previously then we can look to go long and target the upper barrier of this channel.
Then on Friday we have the US Consumer Sentiment Index released, another high impact news event.
Could these events provide the catalyst for a break below the supporting trendline? Or will we be looking at the continuation of the bullish trend?