Cross-Eyeing: Bearish divergence on EUR/JPY – Trade Closed

Trade Closed: 2011-6-28 03:37

EUR/JPY 1-hour chart

Boy… I was almost sure I’d hit my profit target (and some!) with this trade. After all, the pair was in a solid downtrend, creating lower lows while testing support at 114.00 time and time again.

Actually, that’s why I felt confident enough to hold my trade open over the weekend. Little did I know that the euro still had a bit of fight left in it. The euro zoomed up the charts to start the week as investors seemed to take their foot off the bear pedal in response to the preparations being made ahead of the Greek Parliament vote on austerity measures.

Apparently, French and German governments are in talks with their banks about rolling over Greek debt, which just shows how confident they are that Greece will pass the austerity program.

Naturally, this launched the euro up like a loaded spring, pushing it back up to retest last week’s high.

The end result:

Trade closed at breakeven: +0 pips/ +0.0%.

Actually, I did attempt to take profit and close half my position when price was stalling at 114.00 early yesterday morning. But there was a big problem – my broker wouldn’t let me.

Apparently, half my position didn’t meet the minimum position size that my broker requires to execute a trade (even if it means closing a portion of one). So basically, my only options then were to either close my entire position, or keep all of it open. Obviously, because I was very confident with my trade idea, I chose the latter. It’s just unfortunate that it didn’t work out in my favor.

Right now, it’d be pointless to blame what could’ve, should’ve, and would’ve happened on my broker. Yeah, it’s a pity that I ended up with nothing despite coming so close to taking profit. But the truth of the matter is that these things have to be factored in when taking a trade. You just have to take these things in stride and learn from them.

Anyway, thanks for following guys, and I hope you were all able to bag a few pips with this trade idea.

Til next time, this is Cyclopip, signing off!

Trade Update: 2011-6-23 17:10

EUR/JPY 4-hour chart

After stalling at the trendline and 61.8% Fib level, EUR/JPY FINALLY shot down during the European session yesterday, as it seemed like risk aversion took over the markets. Poor euro zone PMI figures, as well as disappointing Chinese PMI data helped spurred the risk sell off.

EUR/JPY dropped to as low as the 113.80 level, and I was sure that the pair was headed to test last week’s low. However, in a crazy turn of events, the pair has retraced back up and is now sitting around 114.80! Dang it!

I totally didn’t expect the pair give back its gains so quickly. The pair had just dropped 150 pips on the day and I thought we wouldn’t see much movement during the rest of the U.S. session. But hey, that’s what makes the forex market what it is!

I’m still bearish on this pair and I don’t quite feel like closing my position just yet. However, I can’t overlook that bullish green candlestick or how Stochastic has just crossed over out of oversold conditions. For now, I’m gonna see how the rest of the Asian session plays out and see if the market will send the pair lower.

I’m moving my stop to my entry point at 115.05 to limit my risk and I’ll make a decision later today as to whether I will end up closing early or not. If I do get stopped out, no harm done! I’ll just reevaluate and consider reentering my trade if there’s another nice setup.

Congrats to those of you who have bagged some pips on this trade!

Trade Idea: 2011-6-22 2:16

EUR/JPY 4-hour chart

Nope I didn’t get the breakout signal I wanted last week, but I do think another short opportunity has emerged on EUR/JPY! Get your Fib-sticks and divergence cheat sheet ready cause this looks like one sweet setup!

After failing to break through key support at 113.60 last week, EUR/JPY has retraced back up. The pair is currently sitting just below the 115.50. And this is where all the fun begins!

First, the pair is finding resistance at a falling trend line. Second, it has formed a Fib-stick formation as a shooting star has formed just below the 61.8% Fibonacci level! Third, bearish divergence has formed as price has registered lower highs but Stochastic is showing higher highs!

Fundamentally, the euro got a nice boost when Greek Prime Minister George Papandreou survived the confidence vote earlier today. This was good news since Greece can’t afford to have a divided government right now. Still, I can’t help but feel that the country has a long way to go. It still has to come to terms with austerity measures and I’m not quite sure how that will go down. That’s why I’m still bearish on the euro.

Yesterday, I actually tweeted that I jumped in and shorted at 115.05, as it looked like the 50.0% Fib was holding. I put my stop above this week’s top WATR, at 116.30. As for my profit target, I’m waiting to see how price will react to the strong support at 113.70. If it looks like it’s holding, I’m gonna close out my position before the end of the week. However, if price breaks through support, I will look to add to my position.

Here’s the gameplan:

Short EUR/JPY at 115.05, stop loss at 116.30, profit target at 113.70.

What do you guys think will happen? Will you join me on this trade? Hit me up with some comments on Facebook and Twitter! and let me know how you plan to trade EUR/JPY this week!

  • Terenacious

    Good Morning!

    Nice setup I will be running ur trade plan with u today! I entered at a slightly higher price but got the same stops and limits! good luck!

    • cyclopip

      Good luck to you too, buddy!

  • ViciousP

    I like it!  I’m setting my S/L a bit tighter at the 100SMA right at 116.00.  It’s bounced off of the 200SMA twice at 115.74 already.  IMO if it breaks both, we’ll know right then and there we went the wrong way.

    • cyclopip

      We saw a pretty tight range yesterday. Looks to me like a triple top, but price is still hanging above 115.00. Hopefully, we’ll get more action (to the downside) today!

  • ケー ちゃん

    Awesome plan!
    Good luck to you all!

    • cyclopip

      Good luck to you as well 🙂 

      • ケー ちゃん

        Hey…thanks! It was a trade worth waiting for. Triple top & divergence….love them. My entry was a bit early… d(^-^) 138 pips!

  • Chuka Madu

    I buy EURJPY at 115.04! SL = 114.89. TP1= 116. 40, TP2 = 117.72.
    Selling only at 114.90 with SL at 115.35 and TP at 113.86
    Good luck to you all

  • Chuka Madu

    The support at 114.96 should not be played with! The Daily reveals a longer term bullish potential. The series of Daily pin bars coming around 113.50 are strong enough to carry pair for longer than current moves have allowed. I’m bullish! Bearish only after break of 114.96

    • cyclopip

      The daily chart of EUR/JPY can also be interpreted as showing a descending triangle, in my opinion. Anyway, I agree that support is strong at around 113.50, which is why I plan to take profit above that area.

      But I understand what you mean as well, it could very well be an uptrend on the daily. But it all boils down to trade management. Money can be made both ways. Maybe we’ll both end up profitable when all is said and done.

      Good luck, mate!

      • Chuka Madu

        True. I cancelled my short order.  I don’t believe in short orders at or around 114.96! That is the break out level of the Daily Pin bar going up and doubles as psychological support level. It’s dangerous selling there in my view.

  • Maxiv

    my short trade opened…. lets see what happens. this morning (UK) it’s down 114.97…

    • cyclopip

      Hopefully we’ll get a clean break of 115.00. Good luck, Maxiv!

    • Chuka Madu

      I wish you well but I believe short orders around 114.96 are in danger looking at the long term.

  • Chuka Madu

    That the current H1 candle is getting closed above 114.96 should serve as a note of warning to my dear bears.

    • cyclopip

      Yes it looks to be holding right now. Might have to wait till the U.S. session before we see a strong move. 

  • Maxiv

    Looks like its bouncing around and stalling 113.80ish level so going to take my chances and take my profit at +112 pips…. happy with that and thanks for that 🙂

  • ケー ちゃん

    Even though I already closed my trade. I still see another potential to hunt more pips. Price still bouncing up&down between trend line and support line, forming descending triangle.
    I set my sell limit @113.50/40  just in case the price break major support line. I will also set buy limit along above trend line, if price goes up but haven’t decided where..

    • cyclopip

      Agreed, buddy! 114.00 seems to be a strong support level… I’m actually contemplating taking profit already. But I have a feeling that if price breaks through here, a sharp selloff could follow.