Setup Review: 2012-12-06 11:46 ET
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From my chart review above, we can see that the divergence signal worked out well this time as we saw broad Yen weakness mid-week. USD/JPY traders took the pair up to that area of minor interest that I marked on the chart at 82.15, where it found little interest this time, and moved to the top of the range to the minor psychological resistance level of 82.50.
Now, I didn’t take this setup because that bullish breakout candle after the consolidation happened in the evening (10pm ET) after I close out my charts for the day; at least that’s what I want to tell myself.
I think the real reason, though, is that after a couple of recent, consecutive losses that have taken my YTD return below break-even, I’ve become a bit hesitant to pull the trigger. Had I just kept on chugging on as I normally do, this trade would probably have taken me back to positive territory.
So, the lesson for today kids is that you gotta keep on, keeping on. We can’t possibly win every trade–or even a majority or our trade ideas–but if we manage our risk and create trades with good reward-to-risk ratios and a little bit of edge our way, the winners can outweigh the losers in the long run.
Well, that’s it for me. I did point out in the chart above that 82.50 may be the top for the week, but I think I’ll stay out for now to watch out the ECB’s latest monetary policy decisions and outlook, and tomorrow’s NFP (check out Forex Gump’s GBP/USD NFP trading guide), may affect short-term risk sentiment.
Trade Setup: 2012-12-04 10:10 ET
This morning I caught USD/JPY giving me a bullish divergence signal as it tested an area of previous support. On the 60m chart above, we can see the market consolidated at 81.80, with buyers eventually taking control and pushing the pair higher. So, I’m watching that area for a long trade, but I’ll wait for similar behavior as last week (i.e., consolidation and buying support).
I’m also watching the 82.15 area as that also attracted plenty of orders on both sides of the market all last week. A retest there and consolidation may end up being a nice setup for a short-term sell on USD/JPY, and what seems to be anti-dollar/safe haven sentiment as the markets price in a US fiscal cliff deal, as well as recent positive global manufacturing PMI data.
Again, we do have a pretty heavy week of economic events on the forex calendar, most notably monetary policy decisions from several major central banks and the US jobs data. That’s why I’m staying away from having a strong fundamental bias and waiting for price action confirmation. Also, depending on if we see any shifts in monetary policies or global outlooks, breakout setups may be in play as well. It’s an exciting week, so stay tuned by following me on Twitter and Facebook. Good luck and good trading!