Double Top on USD/JPY? – Closed Trade

Closed Trade: 2012-03-29 04:20 ET

Good morning forex friends! Not much action for USD/JPY this week after the big move sparked by Big Ben, and with the market trading at a potential support area ahead of the fast approaching weekend, I’ve decided to close my trade up for a small profit.

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

PCDPOD20120322.review.png

On the 4 hour chart above, we can see USD/JPY grinded lower to a minor support area from my entry at 82.95. Stochastic is now indicating that this sell off that started in yesterday’s US session, and progressed through today’s Asia and European session, might be running out of steam.

The biggest factor for me, though, is that we have weekly US initial claims coming up at 8:30 am ET. This event has been trending positively for the US, and the market tends to react by buying up USD/JPY after the release. I’m not gonna take a chance of letting go of some profits, so I decided to close my position around that minor support level this morning at 82.44.

Total: +51 pips/ +0.68% gain

Could the pair fall further or could we see a negative read? Sure, but with the weekend quickly approaching, it is prudent to lock in the profits from this trade and move on to a new opportunity. Looking back on this trade, I don’t think there was anything I would have done differently, and I think moving in at market was the right adjustment given that 83.50 was never tagged before sellers took over. All around…not a bad trade!

That’s gonna be it for me this week as I look to cut my week short. I hope this post was helpful to those of you on your journey to become a discretionary trader. I know writing everything down helps me out a lot! :)

Thanks for checking out my blog, and as always, be sure to follow me on Twitter and Facebook for new observations and ideas. Have a great weekend!

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Entry Adjustment: 2012-03-28 21:27 ET

Good evening! It looks like 83.50 is just out of reach for the USD/JPY as bears seem to be jumping in, pushing the bulls out of the way. I still think that double top is a good signal, so I’m going in rather than waiting for the perfect entry.

PCDPOD20120322.entryadjust.png

I zoomed into the 4 hour chart above and we can see the pull back higher found resistance right at the neckline of the double top; this area also coincides with about a 50% – 61% Fibonacci retracement. The signal for a probable reversal is the doji marked on the chart, along with stochastic starting to turn out of overbought conditions. This is enough for me to think that my perfect entry at 83.50 won’t be met. So, here is what I decided to do:

Short at market (82.95), stop at 83.70, profit target at 82.00

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

This trade adjustment creates a potential 1.26:1 return-on-risk, and short-term swing trade for the week as I target Friday’s lows. I think if we don’t see movement before the end of the week, that double top will be invalidated even further.

So, I’m in and all I can do now is just see how the market plays out and be ready to adjust to any new news or catalysts. As always, be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!

Trade Idea: 2012-03-22 00:30 ET

Good morning forex friends! My setup for the week is another swing play on USD/JPY as I see some juicy technical signals. Is it time for the pair to pull back from its awesome rally?

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

PCDPOD20120322.png

As I mentioned earlier, I see quite a few enticing signals for a short play on USD/JPY–let’s check out the 4 hour chart above.

First, we can see that the pair has been on a major uptrend ever since this past February, where we saw a combination of Yen killing events like rhetoric of an S&P Downgrade on Japan and the BOJ increase in its asset purchasing program. After about a month and a half of Yen selling, USD/JPY is now overbought on both the weekly and daily time frames. On the 4 hour, it’s come out of overbought, but the last high did make a divergence with the price “highs,” signaling that the double top formation is a high probability signal that the rally is out of steam.

So, I’m looking to do a counter trend trade on USD/JPY, and if the market does go my way, I think support may come in between 80.00 – 81.00 (which happens to be around the typical Fib levels closely watched by traders). Over the course of the last couple of years, that area as held as strong support and resistance, and if retested it could hold as support. My profit target will be in that area. Since the 4 hour Stochastic is showing an oversold signal, I’ll jump in short on a pull back before taking the longer term position. Here’s what I am going to do:

Short half position USD/JPY at 83.50, stop at 84.90, profit target at 81.00

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Risk Disclosure.

This trade structure gives me a potential of just under 2:1 return-on-risk, and I’ll be risking 0.50% because it is a counter trend trade.

Let’s see if the recent positive Japanese Trade balance data will be the catalyst this trade needs, but as always, if the market environment shifts on a new catalyst (since this is a longer term trade, it probably will), I’ll be sure to adjust my open orders or open position quickly. Be sure to follow me on Twitter and Facebook for updates. Thanks for checking out my blog…good luck and good trading!

  • soUman

    why do you cut the weekend period from the chart? I know its a horizontal line, but it took me 5 min to figure it out : ) 

    • pipcrawler

      Haha, I’ve never included the weekends because of the fact no trades happen.  It doesn’t make sense for me to include that in my analysis.  Does it make sense to you?

  • BlackRain

     I’ll take some profit at 82.5 and than at last I’ll go out at 81.9.

    • pipcrawler

      82.50 is an area of minor support (as it looks like it has held at the start of this week), so that’s probably a good plan if you wanna play it safe.  Good luck to ya!

  • BlackRain

    mr. pipcrawler are u still in this trade… it dont looks good anymore^^