I’m taking another short opportunity in a longer-term downtrend, this time on CAD/JPY as it seems to have drawn in sellers at a previous swing high. Time for selling to resume?
CAD/JPY Short at Previous Resistance
Fundamentally, Japan clocks in a bit higher than Canada in my opinion thanks to stronger sentiment and wage data recently in the Land of the Rising Sun. Inflation conditions are also still a concern in Canada for everyone except the Bank of Canada, and there’s also concerns of a housing bubble in Canada that we should all be on the lookout for.
But probably what has me still bearish on the Loonie is the price action, not showing much strength after an optimistic BOC policy statement yesterday and the falling oil prices after OPEC extended its output-cut deal. With this in mind, and the market finding resistance at a previous swing high on the four hour chart above, I’ve decided to take a small short position. This goes with the longer-term downtrend lower since the pair traded just under 89.00 back in December, and with the stochastic indicator now coming out of overbought territory, could be drawing in sellers once again.
With a few red candles already in the books, I’ve decided to short at market with a 2x daily ATR stop. And I’m going with a soft target at the previous swing low as a place to re-assess and potentially add to my position or cut, depending on the market situation at that time. Here’s what I’m doing:
Short half position CAD/JPY at market (82.94), max stop loss at 84.56, initial target at 80.85 for an initial 1.3:1 return-on-risk potential.
I’ll be risking only 0.5% of my account on this position and I’ll look to re-assess to potentially reduce my risk and maximize my gain if the market still has strong downward momentum around the previous support area around my first target.
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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