A USD C Leg Would Offer Mega Profits.
Updated
Here's a complimenting USDJPY analysis to the C leg hypothesis explained in the below post.
I've been buying USDJPY a lot recently. Heavily loading up into the aggressive crash moves intraday, moving stops to even and by this point fully expecting that nice clean rip to new daily highs, where I begin to trail stops and look to repeat into the next crash.
It's started to feel really easy of late, and that's always a good reason to be cautious. Because although it is true there are times it's easy trading the trend, it is always easy trading the trend heading into the reversal. Heading into a reversal aggressive dip buying is heavily rewarded. That's what makes it feel like a good idea to dumb stuff into the reversal.
The USD reversal here would be an epic trade.
A case can be made for the high of USDJPY being in now and this being a bull trap rally. Inside of that case, we'd now be at the area where there is most risk of it turning. We have the 76 rejection and the 61 retest. In a strong move, we're usually going to see the 61 reject.
If the USDJPY high is not made with the 76 but there is going to be a big high in it, then we'd likely see a butterfly.
That'd mean a hyper bullish USD in the near future but that being a false breakout. Top to bottom that trade would pay a little over $300 per 0.01 traded.
These are big numbers when you consider your risk per 100 pips is $7 trading at 0.01.
USDJPY could have a little more go to fill local short level but to bet on the high being in the risk on the trade looks like this.
If that trade fails as a reversal pattern then usually the most bearish thing you can hope for is a big spike to fill the butterfly.
That's another great level to try to fade the move inside of a narrow zone but given that if the 76 trade fails usually the best case is a bearish butterfly - this is really bad for immediate term shorts. It'll go parabolic even if you're generally right. And if you're entirely wrong it's just going to trend against you. All pullbacks ending higher than the last.
I feel like a lot of the times there are major reversals in USDJPY we see a really strong open to the week. This can come off a gap down. I remember a big USDJPY recent high being a 50 pip gap down, recovery and then 200 pips up in a minute into the high. Anything tell tale like that early in the week I'd probably be interested in fading around the resistance levels.
If we keep rallying through I'll stick with my buying all dips strategy with USDJPY and review it at the 1.61 if we get there. But if we see a sharp break in this I'm going to start to act as if we're inside of a developing C leg.
Inside of a big C leg the small chart action would usually be something like this.
And this would pick up momentum as it went until it turned into a full blown crash.
If all of that happens, I think we'll see the most spectacular of USD rallies after it.
A mighty crash in USD could set the scene for a really big and sustained rally. Would be really obvious to look for if the C leg idea hits.
I've been buying USDJPY a lot recently. Heavily loading up into the aggressive crash moves intraday, moving stops to even and by this point fully expecting that nice clean rip to new daily highs, where I begin to trail stops and look to repeat into the next crash.
It's started to feel really easy of late, and that's always a good reason to be cautious. Because although it is true there are times it's easy trading the trend, it is always easy trading the trend heading into the reversal. Heading into a reversal aggressive dip buying is heavily rewarded. That's what makes it feel like a good idea to dumb stuff into the reversal.
The USD reversal here would be an epic trade.
A case can be made for the high of USDJPY being in now and this being a bull trap rally. Inside of that case, we'd now be at the area where there is most risk of it turning. We have the 76 rejection and the 61 retest. In a strong move, we're usually going to see the 61 reject.
If the USDJPY high is not made with the 76 but there is going to be a big high in it, then we'd likely see a butterfly.
That'd mean a hyper bullish USD in the near future but that being a false breakout. Top to bottom that trade would pay a little over $300 per 0.01 traded.
These are big numbers when you consider your risk per 100 pips is $7 trading at 0.01.
USDJPY could have a little more go to fill local short level but to bet on the high being in the risk on the trade looks like this.
If that trade fails as a reversal pattern then usually the most bearish thing you can hope for is a big spike to fill the butterfly.
That's another great level to try to fade the move inside of a narrow zone but given that if the 76 trade fails usually the best case is a bearish butterfly - this is really bad for immediate term shorts. It'll go parabolic even if you're generally right. And if you're entirely wrong it's just going to trend against you. All pullbacks ending higher than the last.
I feel like a lot of the times there are major reversals in USDJPY we see a really strong open to the week. This can come off a gap down. I remember a big USDJPY recent high being a 50 pip gap down, recovery and then 200 pips up in a minute into the high. Anything tell tale like that early in the week I'd probably be interested in fading around the resistance levels.
If we keep rallying through I'll stick with my buying all dips strategy with USDJPY and review it at the 1.61 if we get there. But if we see a sharp break in this I'm going to start to act as if we're inside of a developing C leg.
Inside of a big C leg the small chart action would usually be something like this.
And this would pick up momentum as it went until it turned into a full blown crash.
If all of that happens, I think we'll see the most spectacular of USD rallies after it.
A mighty crash in USD could set the scene for a really big and sustained rally. Would be really obvious to look for if the C leg idea hits.
Trade active
The clean TA version of the C leg low and reversal here would be more like this.
But like I say, I've been buying a lot of USDJPY dips - and they're ruthless in the stop hunting. In a full blown reversal in USDJPY I think it'd probably overshoot first.
Trade closed: target reached
This is maybe a giant head and shoulders forming. Note
Referenced early week rally came.
USDJPY shorts filled.
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