As twitted yesterday (See: "$TNX reached forecast support last month; now threatens loftier rally - Watch $USDJPY" here: https://twitter.com/4xForecaster/status/484515622290595840), a discreet break of overhead resistance indicated a potential rallying to new highs. This comment concerned a simple analysis of the benchmark 10-Year US government bond ($TNX) relative to the current positively correlated Japanese pair.
Pattern traders might possibly perceive three patterns therein - One distinct and two Sharks, one of which completing at the 0.886 of its zero-X impulse leg, and another potentially completing at its 1.131 of that same leg.
The typically comes with an acolyte in the pattern, which complete the entire zero-X-A-B-C-D move at 50% of the B-C leg.
The recent breach of a did recently provide a clear visual indication of the bull's intent to own this pair. Therefore, in the most immediate time, I would be glad to see a conversion of that from a once resistance to then-support before exposing a more position, especially as the 4-hour break-out candle might possibly be followed by a consolidation event giving time for the market to absorb this directional conversion.
Whether a validation of the as support occurs or not would not diminish the directional sign of the market, but it would certainly help establish added position. Traders would need to refer to their own set of indicators or method to gain added confirmation of support at that if and once price validated the recent at its topside.
Expanding the analysis to the remainder of the chart, one larger and softer-sloped (hence stronger) emerges, which is likely to impact negatively on any future price advance. In fact, it comes at a level that may or may not triangulate a separate overhead defined by the predictive/forecasting model.
The predictive model churned out an early reversal sign (not signal), pending a reversal confirmation signal, which might occur at the same time as the validation defined above. Independent of that validation expectation, though, a signal remains pending, and a set of targets have emerged, namely:
1 - TG-1 = 102.531 - 03 JUL 2014
2 - TG-Hi = 103.022 - 03 JUL 2014.
The first target is of moderate probability (Yellow). This means that price favors its validation at a lesser probability than the typical Green colored target. However, the lesser the probability, the higher the resistance and reversal potential. For instance, the loftier TG-Hi points to a low-probability of being hit (Red), but probably act as a stronger rebuff level, suggesting that more bears are entrenched in TG-Hi than at the TG-1 level.
Combined with the aforementioned larger , it will be interesting to see whether the intersection of TG-1 and that might have any timing prediction powers over price by virtue of their intersection, which may or may not help triangulate a price x time level of resistance ... But don't count on it.
$USDJPY turned , yet a set of technical events would need added completion to validate this trend into a bona fide reversal signal. Were it be by pattern completion, validation or predictive signalization, all of these conditions remain unanswered at this point. Therefore, the directional indicator shall remain neutral for the time being, although this trader's bias is implicitly while technically (explicitly) guarded ... In other words, need proof, and this is something I let my predictive/forecasting model answer for me.
Predictive Analysis & Forecasting
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Thank you for pointing this completion out and for following my comments. Much appreciated.
If an entry was already effected from a lower entry point, I would refer back to risk tolerance.
Assuming that the current price action is far off the entry level with multiple pips under the belly and assuming a H4 timeframe, then I would look for a SL based on structures. Here, 101.227 makes for the clearest and most recent structure-low (i.e.: a higher-low in this recent price reversal at this H4 timeframe), but a later bearish failure occurred also at 101.400.
Another way to define these SL levels would be using significant Fibonacci levels, assuming that you are very familiar with these but not using them. A break below the 38.2-Fib level should prompt the trader to look for a deeper level (perhaps at the 61.8-Fib) of reversal, if ever.
I personally use a different set of tools (non-price, multi-layered indicators) which help me filter out fakes, noise and define/confirm R/S levels and forecasts. It's something I cannot share, but the point here is that trading does NOT have to be done from the price field.
Hope this answer your question somewhat.