Selling CAD/JPY Off a Falling Trend Line – Trade Closed

Trade Closed: 12-07-2012 03:00

Boy, am I glad I closed my trade last night. I was able to lock in some pips before the market moved against me!

CAD/JPY Daily Chart

I’m really glad I closed this trade early. But then again, I had more than enough reason to do so!

I didn’t want to expose myself to event risk surrounding the release of the FOMC meeting minutes and the BOJ rate statement, so I had planned from the get-go to close my trade before these two major events.

And when I looked at the charts yesterday, it seemed that it was a good time to bail since price was testing a critical support zone. The 4-hour chart of CAD/JPY bore a rising trend line that price seemed to have difficulty crossing, and in fact, a few reversal candlesticks had formed. How’s that for multiple time frame analysis, eh?

Anyway, those candlesticks made me nervous, so I thought it would be best to exit right then and there.

Closed trade manually at 77.71: +109 pips / +0.91%

As it turns out, it was a good decision on my part to exit early, as CAD/JPY soared not long after I had closed my trade. Score!

Looking back, I’m really happy with how I managed this trade since I showed flexibility and practiced smart risk management. Hopefully, I can continue making smart decisions this quarter.

Thanks for following, fellas! I hope you guys made a few pips off this trade as well!

Trade Update: 10-07-2012 03:50

CAD/JPY Daily Chart

What a crazy end to last week!

Canadian employment figures came in better than expected, as 7,300 jobs were added to the economy, while the projection was for a net increase of 5,100. Meanwhile, the unemployment rate dropped to 7.2%.

However, as what normally happens on the first Friday of every month, all news reports were overshadowed by the granddaddy of news reports, the non-farm payrolls report!

Once news hit the airwaves that the NFP figures came in worse than expected at just 80,000, marking the fourth consecutive month that payrolls fell, all hell broke loose!

Stocks, futures, and higher-yielding currencies all sold off, as traders sought the safety of the dollar and the yen. In turn, this helped CAD/JPY drop to new lows, helping out my position!

Now, I don’t want to count my bunny ears before they’re chopped off, as you never know what might happen in the forex markets! I’ve seen far too many trades where I was in the green, only to see my pips get washed away by a surprise news report!

With the Bank of Japan set to make its monetary policy statement later this week, I think it would be prudent to make adjustments to my trade. Given how all the other major central banks have introduced quantitative easing measures, I wouldn’t be surprised if we see the same from the BOJ this week!

I’ve decided to move my stop to my entry point, giving me a risk-free trade. This way, even if we hear rumors of more QE from the BOJ, a spike in yen crosses won’t set my trade on fire!

I’ll be sure to hit y’all up with another update before the end of the week. Good luck to those of you who joined me on this trade!

Trade Idea: 05-07-2012 01:55

Thanks to my Twitter buddy @elgitano5720, I was informed about this sweet trade setup that had materialized on CAD/JPY.

Price is in a KILL ZONE right now! Not only is it testing a falling trend line on the daily chart, but it just bounced off a MAJOR area of interest – the 79.00 psychological handle.

This level has held more often than not, so naturally, I began to think of the possibilities that this setup presented. Have a look:

CAD/JPY Daily Chart

Zooming in to the 1-hour chart, I was pleasantly surprised to see that a solid bearish divergence had formed, and that price had just been rejected at 79.00.

CAD/JPY 1-hour Chart

With the daily and 1-hour charts giving me signs to short, I took that as my green light to sell this sucker at market.

Yeah, this trade is mostly based on technical analysis, but with so much uncertainty surrounding the markets at the moment, I don’t think there’s any solid bias for bullishness or bearishness. So why not go with what technicals are telling us, right?

Anyway, here’s how I set up my trade:

Sold at market (78.80), stop loss at 80.00, profit target at 77.00.

I didn’t want to set my stop loss too wide, since price didn’t cross the 79.00 handle by much when it bounced off this level in the past. On the other hand, I wanted to set it high enough to clear the spike back in October 2011.

As for my profit target, I didn’t want to be too ambitious, so I’m looking to exit around 77.00, which has been a price magnet in the past. All in all, it makes for a decent 1.5:1 return on risk.

Now, I know that trading just before the BOE and ECB rate decisions and the U.S. NFP report involves a lot of event risk, so I decided to scale back my exposure and put just 0.50% of my account on the line. Besides, I don’t wanna get burned by BOJ intervention speculation again!

What do y’all think of this setup? Anyone willing to join me?

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16 comments

  1. DuncanMc

    I also spotted this move, but I think I’ll join you when the price breaks down the rising wedge pattern that formed.

    Reply
  2. Velting Kaylen

    nice setup Cyclopip. seen your thread yesterday and entered at 78.85. theres been a nice downward movement already : )  

    Reply
    • cyclopipcyclopip Post author

      Great price! I think we’ll see some action before the weekend. The US NFP report should get this going (hopefully in our favor).

      Reply
  3. cyclopipcyclopip Post author

    Closed trade at end of London session to avoid any crazy moves caused by the FOMC and BOJ interest rate decision! 

    Reply

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