AUD:JPY – Pennant Buy

Aussie Yen broke through the resistance of a small triangle formation yesterday.

This has the look of a “pennant” type triangle.  Although the resistance line is a little flatter than a text book example, it’s a tight triangle within 2 trend lines and follows a steep “flagpole” style rally. Pennants are a classic continuation setup.

Price is still at about the same level as a trader with a stop entry above the pennant resistance  may have entered yesterday. Although it’s nice to see trades run in your direction as soon they trigger, there’s no reason why late comers can’t take advantage of a slow start like this to join the set up.

AUD: JPY – Daily. Source: CMC Tracker

The strategy outlined on the chart projects the height of the pattern from the triangle resistance line

The stop is set behind yesterday’s low on the basis that a retest too far back into the support zone of these tight continuation patterns is likely to indicate failure.

Cheers

Ric

About Ric Spooner

Over 30 years market experience - professional trader, broker, director
This entry was posted in Forex, Market, Trading and tagged , , . Bookmark the permalink.

2 Responses to AUD:JPY – Pennant Buy

  1. Marc Nell says:

    I have a long trade on AUS/SGD at the moment. Is it valid to take another similar pair? Or are you just doubling your risk?

    • Ric Spooner says:

      Hi Marc,

      It’s good risk management practice to limit your net long or short exposure to a single currency. Obviously, each cross rate does not always move in the same direction or at the same rate but generally there is a strong correlation.
      One approach to risk management is firstly to limit your exposure on each separate trading position using position sizing. This sets the size of your position to limit the loss on each position to a certain percentage of your trading capital e.g 1 or 2%. Second to have no more than 2 net long or short positions in the same currency at any one time e.g no more than 2 long positions in Aussie against any other currency unless they are offset by other short Aussie positions
      Our website has a detailed risk management guide which outlines these and other risk management strategies.
      I hope this helps
      Cheers
      Ric

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s