The consolidation breakout play turned into another consolidation market, but the bulls could be ready to take the pair higher. Time to reduce risk & try to max out potential gains!
EUR/JPY Long Adjustment
It looks like the highs of the previous consolidation area (between 127.50 – 129.00) turned out to be a strong support area. It was retested not too long after the breakout higher, which triggered my long entry at 129.00.
Since then, 129.00 held as support, likely due to broad risk-on sentiment and speculation that the ECB will start pulling back on quantitative easing efforts this year. Unfortunately for my trade, though, the area around 130.00 – 130.50 has been tough, turning back the bulls at every charge in the last week. But fortunately, I’m seeing higher “lows” in price action on the one hour chart above, signaling to me that still have control and odds are that ceiling can be broken.
Of course, I have no idea whether resistance around 130.50 is gonna break, but with no major data events for the next couple of weeks for either currency, I think the grind higher has good odds of staying intact. I’ll look to maximize my gain on an upside break of that area.
With that said, I also think about the possibility of a breakdown on any surprise negative events we may get, so I’ve also got a plan to reduce my risk before adding to my position. Here’s what I’m doing:
Rolled up stop on open position to breakeven (129.00).
Buy stop at 130.80 with half of starter position. If triggered, all stops moved to 129.50 and next adjustment target will be 132.00. Max target is still 134.00.
Based on this plan, if the second position is triggered, my max loss is around 0.29% if stopped out at 129.50, with my max gain increasing to 3.64 times my original 0.50% risk, up from my original 2.22 R:R. But for now, my risk is virtually 0.00% since I only still have my first position working for now.
Again, no major events for the next few weeks, but stay tuned for potential adjustments if surprise developments from the ECB, BOJ, or geopolitics has volatility hopping.
As always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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