Cross-Eyeing: Horizontal Channel Forming on EUR/JPY? – Trade Closed

Trade Closed: 2010-11-24 22:06

EUR/JPY 4-hour Chart

Take a look at that red candle – that’s a good 200 pips in just 4 hours!

To be honest, I really didn’t expect the pair to drop so quickly. I was a little concerned when news broke out about North and South Korea, and I thought that the yen would get sold-off. Indeed, that was the initial reaction, but once the London session came rolling around, the euro got sold like a copy of Black Ops when it was first released!

Apparently, there are growing concerns that after the Irish accepted a bailout last weekend, other countries, namely Portugal and Spain, may have to request for bailouts as well.

The result? EUR/JPY tumbling over 200 pips and hitting my second PT!

Here’s a recap of what happened in my trade:

Closed half position at 113.00 – +190 pips/ +1.58%
Closed half position at 111.00 – +390 pips / +3.25%
Average – +290 pips / 2.41%

The trade turned out quite profitable for me. I do think that I set my take profit targets at the right areas (at the middle and bottom of the channel).

I do admit that I caught a bit of luck in this trade, with the nice run of risk aversion that we saw this week. I certainly didn’t expect the pair to drop so quickly.

Also, as the great Phil Jackson once said, “Can’t get too high after wins, nor can you get too low after losses.”

So while it feels good to finally grab a nice win, I must stay focused and humble and look for the next great setup.

Thanks for all the comments fellas and thanks for reading my blog!

Trade Update: 2010-11-23 00:05

EUR/JPY 4-hour Chart

I caught a lucky break yesterday, as I was able to get triggered at the top of channel. Price didn’t quite reach 115.00, but it’s a good thing my orders were at 114.90, otherwise I wouldn’t have gotten triggered.

Euro pairs gapped up over the week, as the Irish finally decided to accept a bailout from the EU and IMF.

However, the euro couldn’t sustain its gains and fell across the board. Apparently, there are those who fear that other countries (ahem, Portugal and Spain) may have to tap into the special EFSF program and get bailed out as well. This left the euro vulnerable, helping out my trade.

In any case, my first PT at 113.00 was hit and now the pair is chillin’ in the middle of the channel. So it’s time for me to make some adjustments.

First PT hit at 113.00. Moving stop on remaining position to 114.90. PT2 at 111.00.

So now I’m trading on the house and I’ve locked in a pretty decent profit. Let’s see if the euro bears will stay in force, or if we’ll see risk appetite come back in play during this shortened week.

Trade Idea: 2010-11-19 01:38

EUR/JPY 1-hour Chart

Once again, my beloved EUR/JPY is stuck in a range. Take note that In the past, EUR/JPY has shown that it normally trades between support and resistance levels, before breaking out to merely trading in another wide range.

Right now, it looks like the pair is trading in a slightly descending, horizontal channel. It has found support just above of 111.00 and resistance at the 115.00. It’s the 115.00 level that’s got my one good eye seeing a sweet setup.

I’ve looked back at the charts, and I see that the 115.00 level has served as a strong area of interest in the past. I think we could find potential resistance at this area, so I’ll be looking to short at this area.

I know, I know, it’s a long way to go. But earlier today, Pip Diddy told me that the market reacted positively when Ireland set aside its ego and expressed openness for an ECB-IMF loan (aka bailout).

With that said, I think that the shared currency will be able to hustle a little bit more to the top of the range and trigger my trade. With not many high impact reports coming out from the euro zone next week, I think we could see this pair stay within range. Hopefully, other sellers are looking at the major resistance and will help send EUR/JPY all the way down to the bottom of the channel.

I’m placing my short orders at 114.90. I do expect the pair to test beyond the 115.00 level, but you know what they say, you can’t always get a perfect entry.

My stop will be at 116.10, way past the previous highs, giving me a stop of about 120 pips. This gives me a stop that is roughly equal to the daily average true range.

As with any channel, I’ll be aiming for the middle (113.00) and the bottom (111.00) of the channel as my take profit points. If both targets are hit, this would give me an average win of 300 pips, which is about 2.5 times my initial risk. A 2.5 to 1 reward to risk ratio? I’ll take that!

Again, here’s my gameplan:

Short EUR/JPY at 114.90, stop loss at 116.10, take profit at 113.00 and 111.00.

Now I just gotta be patient and wait for my trade to get triggered. For now, Imma get ready catch that Patriots and Colts matchup on Sunday! Oh yeah baby! Who ya putting your money on, Tom Brady or Peyton Manning? Don’t ya just love football season?

18 comments

  1. dandare

    Good observation.
    I would look for price to test the 115.53 level,
    and then retrace where I would expect resistance to support level of 113.80 to come into play. A break of that would test the 113.00 level. A break of that would mean more pips.
    Nothing wrong with that. Unforseable world events can throw the best plans to the wolfs.
    But the setup looks good.

    Reply
  2. dandare

    Good observation.
    I would look for price to test the 115.53 level,
    and then retrace where I would expect resistance to support level of 113.80 to come into play. A break of that would test the 113.00 level. A break of that would mean more pips.
    Nothing wrong with that. Unforseable world events can throw the best plans to the wolfs.
    But the setup looks good.

    Reply
  3. PIPSPlease

    Wow, you were so right on! And I am sore from kicking myself for not getting in. I had planned to and missed it. I will be following you from now on. Great trading, THANKS!

    Reply
  4. topgun

    Nice Trade. I’m kicking myself for trailing my stop too close and got take out by 5 pips and missed the run through 113. Can’t complain about 130 pips though.

    Reply
  5. PIPSPlease

    Wow, you were so right on! And I am sore from kicking myself for not getting in. I had planned to and missed it. I will be following you from now on. Great trading, THANKS!

    Reply
  6. topgun

    Nice Trade. I’m kicking myself for trailing my stop too close and got take out by 5 pips and missed the run through 113. Can’t complain about 130 pips though.

    Reply
  7. Jimzawy

    WAW, I caught up late, at the 113 level, and now I got me a clean 200 pips, Cyclops, u Rock,
    So, judging by the up coming news about the Asian Stock market affected by the Ireland B.O. and the fact that Hedgers wont let the Euro slip that easy, would u bet on the EURJPY climbing back to 115 or will it just fall down like a turkey on thanks giving :D

    Reply
  8. Jimzawy

    WAW, I caught up late, at the 113 level, and now I got me a clean 200 pips, Cyclops, u Rock,
    So, judging by the up coming news about the Asian Stock market affected by the Ireland B.O. and the fact that Hedgers wont let the Euro slip that easy, would u bet on the EURJPY climbing back to 115 or will it just fall down like a turkey on thanks giving :D

    Reply
  9. cyclopipCyclopip

    Thanks for the comments fellas. Caught a little bit of luck and it paid off.

    @jimzawy – Based on technicals, it looks like a good buy (long wicked candle and the channel)and with the short week, could we see a mid week reversal? Possible, but I’m not so sure about going long given the fundamentals.

    @topgun – 130 pips is still 130 pips! A win is a win! Congrats.

    Reply
  10. Jimzawy

    Good point, although it may rise for a few pips, any more bad news from the EUR would send the pair right back to the 111 and who knows, maybe it’ll break it this time, I guess there is too much risk in this one, I’ll keep observing

    Reply
  11. cyclopipCyclopip

    Thanks for the comments fellas. Caught a little bit of luck and it paid off.

    @jimzawy – Based on technicals, it looks like a good buy (long wicked candle and the channel)and with the short week, could we see a mid week reversal? Possible, but I’m not so sure about going long given the fundamentals.

    @topgun – 130 pips is still 130 pips! A win is a win! Congrats.

    Reply
  12. Jimzawy

    Good point, although it may rise for a few pips, any more bad news from the EUR would send the pair right back to the 111 and who knows, maybe it’ll break it this time, I guess there is too much risk in this one, I’ll keep observing

    Reply

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