Sunday, April 20, 2008

Watch alert: USD/JPY


This is the USD/JPY daily chart.

During the October period last year, the 50 SMA went quite flat before resuming the downtrend. It is considered a new downtrend after October.

This chart looks like a potential good rubber band trade setup:

  • We are still trend-trading; 50 SMA is angling down so we are in a downtrend and we are looking to short the market at cycle high, above the 50 SMA, thus a rubber band trade.
  • There is a cluster of resistance at about 106 - 107. The price is currently at 103.66 as we speak.
  • We have a possible cycle high; stockastic has created a hook down; no mini-divergence though.
  • There is a complex A-B-C-D-E retrace pattern against the 50 SMA; a high probability scenario
  • There is a 5"wave" count on the momentum; a high probability scenario setup also.

All looks perfect but the long-term (3 X Daily chart) is filtering the trade out. MOM (fast MACD) is pointing downwards. I am waiting for it to turn up. The long-term chart filtering or the fractal energy is preventing me from pulling the trigger.

Update:

I did not take a position with the USD/JPY pairing.

The long-term chart (3-day chart in my case) that filter out the trade. MOM (which is a fast MACD) is still angling up as indicated by the blue arrow:

Anyway, I would have been stopped out even if I enter into it:

I will wait for my next trade.

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