We have a nice setup forming on USD/JPY on the 4H chart, with a breakout trade.
I analyzed this chart and I have discovered that price appears to be in a 3 wave pattern. Price had impulse down leg (See chart for details), had a
corrective up move, and now has now started a down leg. I am expecting the new down leg to be equal to the length of the first impulse down leg.
With this logic, I was able to predict and plot the next move on the chart. I have replicated a down leg that is equal to the impulse leg, to determine where I expect price to move to. After seeing a nice pullback leg, I was then able to replicate the leg, knowing that the corrective leg had found it's top, which coincides with the resistance line above price. (See chart for details)
I am expecting a down move of 110 pips, which will complete at around 109.90. This is under the provision that price successfully breaks much more reliable move than a breakdown without a retest.
I do not consider this trade to be valid to create a new position at this time, unless it breaks the horizontal support. So bare this in mind. It would be more ideal if price breaks 111.20, then retests the original support as resistance and then breaks down. This would be the right place to be considering a position in this pair.
There was an entry opportunity many hours ago which was taken, but since price moved a lot since then, has now expired. We now need to see a break for any new position to be considered. Entering now will have too wide of a stop loss, and is not worthwhile.
The target price is not only a measure move price of the impulse down leg, but also coincides with a sideways support. This could be a good place to watch for long opportunities, if price bounces in the near future.
The calculation is simple, I have simply measured the first impulse leg, replicated this leg and placed the leg to where the the correction ended. Then I had a measure move target.
Those of you in my Telegram signals group will already know about this one. And we are watching the trade and waiting for it to become further favorable for us.
I will be posting updates on this trade as it progresses below. So leave a like & follow so you can keep up to date with this analysis.
If you have any questions or queries, feel free to connect with me.
"I am expecting a down move of 110 pips, which will complete at around 109.90. This is under the provision that price successfully breaks much more reliable move than a breakdown without a retest."
I am expecting a down move of 110 pips, which will complete at around 109.90. This is under the provision that price manages to break the horizontal support line at 111.15.
A trade under this support level will be much more reliable if price breaks below 111.15, retests the horizontal support as a new resistance, and then breaks down again. This shows that price has acknowledged the support turned resistance line, and has accepted it as a new resistance.
Now that USD/JPY has broken horizontal support. We can safely say that the trade has broken out, and we should now be looking for an ideal price area to enter the market.
To find the optimum area to enter the market, I have gone down to a lower time frame, and began analyzing the 2H chart.
When I analyzed the 2H chart, you can see a healthy breakout ignited by an engulfing signal at channel resistance further up in the structure (See chart below for details). Since then there has been a strong breakdown.
Now that price has dropped straight down, we need to wait for some upside correction before entering, or we will be eating like a bird and pooping like an elephant. I want to see a pullback before considering any further positions.
I would really like to see price test the original horizontal support line as a new resistance level before breaking down. If we get this retest, we will also get a simultaneous test on the channel resistance again too.
If this retest is successful on both channel and horizontal resistance, this will be a fantastic opportunity to short the market and catch a profitable move.
I will be further updating this idea as it develops.
When analyzing the recent developments on the 2 hour chart, price had an aggressive upside move, which appears to have stalled nearby the channel resistance, and stalled right on the 20 moving average resistance, giving us a dark cloud cover candle.
The reversal candle appears to be following through, and now with a retest on the sideways resistance of the channel, could we finally get the breakdown we are looking for?
See my analysis below for more details.
This is the last opportunity price has to stay within the channel structure. If price closes within the channel (As price currently looks in the below picture) then breakdown could occur. If price closes above the channel structure and the sideways resistance line, then I believe that the downside is over, and we should look for another trade.
This happened. Let's move onto something else.