USDJPY → On the way to 152.000? Let's Maximize Profits!
Updated
USDJPY is on its third leg up in this bull trend and heading toward a Resistance Zone at 149.350. Should we consider shorting the resistance? Or longing a pullback?
How do we trade this? 🤔
Longing a pullback is the more probable trade. While we are looking at the third leg up in this bull trend (a situation where we may want to refrain from longing), we do not have any sign of a sell signal in sight. The RSI is over 70.00 near a Resistance Zone which means we should wait for a pullback toward the bull trend line near the 147.500 area and wait for a strong bull response. The Resistance Zone is the result of a high-volume price area; look to the left on the chart to see that data.
Once we see a strong bull bar closing on or near its high off of that trend line, it's reasonable to take a long position at a 1:2 Risk/Reward Ratio. Take half profits at 1:1 Risk/Reward (149.600) just into the Resistance Zone, move your take profit up to the entry price to lock in profits, then swing the latter half of your position to 151.100 or until you see a sell signal near the previous high of 152.000.
The probability of profit weakens as the trend moves into the third and fourth legs and therefore, the position size of this trade should be smaller to reduce our initial risk.
💡 Trade Idea 💡
Long Entry: 148.100
🟥 Stop Loss: 146.600
✅ Take Profit #1: 149.600
✅ Take Profit #2: 151.100
⚖️ Risk/Reward Ratio: 1:2
🔑 Key Takeaways 🔑
1. Third leg up in a bull channel
2. Near a Resistance Zone
3. Gap back down to the Bull Trend line
4. RSI at 80.00 and above the moving average, supports a pullback
5. Wait for the price to come back down to the bull trend and bounce to enter a trade
💰 Trading Tip 💰
The longer a trend continues after 3 legs, the probability of that trend continuing lessens. Because of this decreased probability, we ought to reduce our risk when entering trades.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and Follow to learn more about:
1. Reading Price Action
2. Chart Analysis
3. Trade Management
4. Trading Psychology
How do we trade this? 🤔
Longing a pullback is the more probable trade. While we are looking at the third leg up in this bull trend (a situation where we may want to refrain from longing), we do not have any sign of a sell signal in sight. The RSI is over 70.00 near a Resistance Zone which means we should wait for a pullback toward the bull trend line near the 147.500 area and wait for a strong bull response. The Resistance Zone is the result of a high-volume price area; look to the left on the chart to see that data.
Once we see a strong bull bar closing on or near its high off of that trend line, it's reasonable to take a long position at a 1:2 Risk/Reward Ratio. Take half profits at 1:1 Risk/Reward (149.600) just into the Resistance Zone, move your take profit up to the entry price to lock in profits, then swing the latter half of your position to 151.100 or until you see a sell signal near the previous high of 152.000.
The probability of profit weakens as the trend moves into the third and fourth legs and therefore, the position size of this trade should be smaller to reduce our initial risk.
💡 Trade Idea 💡
Long Entry: 148.100
🟥 Stop Loss: 146.600
✅ Take Profit #1: 149.600
✅ Take Profit #2: 151.100
⚖️ Risk/Reward Ratio: 1:2
🔑 Key Takeaways 🔑
1. Third leg up in a bull channel
2. Near a Resistance Zone
3. Gap back down to the Bull Trend line
4. RSI at 80.00 and above the moving average, supports a pullback
5. Wait for the price to come back down to the bull trend and bounce to enter a trade
💰 Trading Tip 💰
The longer a trend continues after 3 legs, the probability of that trend continuing lessens. Because of this decreased probability, we ought to reduce our risk when entering trades.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
Like 👍 and Follow to learn more about:
1. Reading Price Action
2. Chart Analysis
3. Trade Management
4. Trading Psychology
Note
The USDJPY pull back is coming along as expected. We received a strong bull candle around the previous high of 148.600 which could indicate a double top reversal formation, meaning we're in for a decent pullback or a reversal.
What we need to see now is strong support near the 4HR 30EMA and Bull Trend support line to remain bullish. If we close below these areas, it's reasonable to get short. My short position would be slightly larger than my long position given how late we are in the bull trend on this timeframe. If we get a strong two-legged pullback and a good bull bounce, I would enter with a larger long position.
We'll assess the price action moving forward and prepare for either direction!
Trade active
Entered a long after a solid bull candle close above the 4HR 30EMA. A 1:1 long scalp position late in a bull trend looking for another attempt at the Resistance Zone at 149.350. Since we're late in the trend and the probability of a continuation is lower respectively to our previous longs in this bull run, my position size is smaller to reduce my initial risk.
Long Entry: 148.152
🟥 Stop Loss: 147.250
✅ Take Profit: 149.100
⚖️ Risk/Reward Ratio: 1:1
Trade closed manually
My long scalp was unfortunately stopped out with a strong bear candle to the bull trend support! This is exactly why late in a trend I use smaller position sizes especially when we're not at the crucial support. Reflecting on my choice of stop loss, I would have been better to set it below the final support just below the bear trend line, but my play relied on the so-far reliable 4HR 30EMA. This also happened while I was asleep and if I had seen that massive sell bar at 22:00 EST, I would have exited the trade early on a follow-through bar.
Now fortunately I woke up to check the charts and caught the strong bull candle off of the bull trend line. This confirms yet again the reliability of that trend line which bolstered my long bias. My last trades bias was correct but a little too tight and early. So I went in for a 1:2 long position and increased my position size by 100% from the last trade since we're *at* support and my stop loss can be tighter relative to my reward. I opened the position at 147.403 and closed it at 147.937, totaling 53 pips in the profit. Now my previous position rendered a loss of 90 pips, but at half the position size.
So I'm up after these two trades by a little bit, but it's time to let USDJPY give us a clear setup. We either need to see strong support off of the bull trend line indicating a test of the Resistance Zone, or a strong close below the bull trend line indicating another fall. We have to be careful at these levels where resistance is close and major resistance like 152.000 is near.
-Joe Dean
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