EURJPY – Intraday short position on weekly chart trade

Last week’s peak was in the target zone for the shark pattern discussed in DV34’s post last week. With weekly chart setting up for a possible candlestick hanging man, our guest blogger explains why he has entered a short position based on the hourly chart and in advance of tomorrow’s Bank of Japan meeting.

Following on from my previous post on the EURJPY, I believed we had a very long term pattern setting up on the weekly chart that was also backed up by the monthly. 

The pattern was called a shark, and the line in the sand for this pattern to remain valid in terms of the 88.6% retracement pattern completion; is either 121.84, or the high of 123.33. If the market breaks these levels then I am wrong and it is time to get out and reassess 

Using the top down approach through all of the timeframes again, to keep things consistent

Monthly Chart

EURJPY Monthly 18 Jan

On the monthly we noted the major level back to 1995, I have revised my view to show that there is an equal move present as well, a reciprocal AB=CD pattern shown with the blue lines.

As per the previous post the oscillators are overbought

Weekly Chart

EURJPY - Weekly

EURJPY – Weekly

On the weekly chart we noted the 88.6% retracement Shark pattern, and last week’s candle looks like a potential hanging man that would be completed by a red candle this week.  

The 10/20 EMA’s are still quite a bit lower suggesting a window for profit potential, so it still looks ok so far 

Interestingly I looked back at the stochastic as it was unusually high, this level has not been reached since July 2007, just as the GFC began…..  the RSI is also at extremes.

While I do not consider 70 a major RSI extreme as I know of some traders who built strategies around buying at 70, 80 from my experience can lead to sudden and quick reversals – even if only brief in nature

4 Hour Chart

EURJPY - 4 Hour 18 Jan

On the 4 hour, the market has now made a new high however the RSI and MACD (trend following tools) have very clear bearish divergence or loss of bullish momentum.

Price = higher high, Indicators = lower high

1 Hour Chart

EURJPY 1 Hour 18 Jan

The pattern I noted on the 1hour in blue is called a alternate bearish bat, the text book version looks like this:

Bat pattern diagram

Given the fact that I am trying to trade a weekly pattern, and that we have the major JPY news on Tuesday I entered short on the pattern completion around 120.00ish and placed my stop based on my weekly view to try and prevent any shakeouts come Tuesdays BOJ statements. 

While it is quite possible this 1hour pattern may fail, digging intraday has allowed me to reduce what would have been a huge 280pip stop loss down to a 175pip stop loss, therefore increasing my potential R:R on the trade and decreasing my risk simultaneously 

I am sure that there will be very heavy short jpy positions right now, and if the BOJ statements fall short of traders expectations on Tuesday – the unwinding will be quick and severe…

Hope this helps,

DV34

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.

4 Responses to EURJPY – Intraday short position on weekly chart trade

  1. sue crew says:

    agree with you

    • dv34 says:

      Thanks sue..! moment of truth later tonight..! I think we may be in the minority though from what I’ve seen lately…

  2. dv34 says:

    Ok intraday pattern worked but did not follow through and stopped out. We now have reached the second pattern completion level 113% extension, this time I am going to wait for a weekly close, I am happy for a small overrun to around 127% around 129.45ish extension but i would like to see a close at around the 113% where it is now. JPY’s are going parabolic which is great for trend followers who have been waiting for a while, but from my experience reversal ratio trading tends to break down in strongly trending markets.. when this happens (usually once or twice a year) it is best to go to try for intraday patterns in the direction of the trend or resort to the higher time frames and pick your battles at key levels only and wait for price action confirmations first

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