USDJPY → Caught in a Bear Trend! About to Reverse? Let's look.
USDJPY has been falling in a bear trend since it's double top at last years high of 152.000. We saw a great bull response candle on December 7th and the close of a slightly lower low on December 13th. We may have had the first leg up in a bull reversal, but do we have the data to support it?
How do we trade this? 🤔
Short answer, no. We need confirmation that we've hit a strong support zone and we do have *some* data to support that. December 7th, good wick on the underside of a buy candle followed by a run up, end of the second leg down. December 13th, slightly lower low but a strong bull run to the upside late in the week, end of the third leg down. This means we need to be looking for strong support since we're starting to get strong support signals.
What we need is a double bottom in the 141.000-141.200 area. A strong buy signal bar and confirmation to provide us with enough probability to enter a long trade. It's reasonable to scalp at a 1:1 Risk/Reward Ratio with hesitancy that this is truly a reversal or even a trading range. We can scalp for now and wait for a third test of support to give us even more probability for a swing trade at a 1:2 or 1:3 Risk/Reward. Stop loss should be below the double bottom and take profit should be near the previous support, now resistance.
Until then, it's wise to wait for that support to reveal itself or the alternative, we break down for another 4th leg. At this time, we assess the chart and look for entries again.
💡 Trade Ideas 💡
Long Entry: 142.600
🟥 Stop Loss: 140.500
✅ Take Profit: 144.700
⚖️ Risk/Reward Ratio: 1:1
🔑 Key Takeaways 🔑
1. Strong Bull Response Candle followed by slightly lower low, third leg down.
2. Strong Bull candles at the end of the last run up, first leg up in Bull reversal?
3. Pulling back to previous low, look for Double Bottom or Breakdown to new Low.
4. If Double Bottom, look to Long 1:1 scalp half position size, may swing other half.
5. RSI at 45.00 and above Moving Average. Reversal Trade Opportunity, Wait for Confirmation.
💰 Trading Tip 💰
Trends typically have three legs in either direction. Signals of a reversal include strong buy or sell bars with large wicks, higher highs and lower lows get weaker, and responses to the reverse direction get stronger. Confirmation lies with double and triple bottoms with a strong candle closing on or near its low/high.
⚠️ 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 comment if you found this analysis useful!
How do we trade this? 🤔
Short answer, no. We need confirmation that we've hit a strong support zone and we do have *some* data to support that. December 7th, good wick on the underside of a buy candle followed by a run up, end of the second leg down. December 13th, slightly lower low but a strong bull run to the upside late in the week, end of the third leg down. This means we need to be looking for strong support since we're starting to get strong support signals.
What we need is a double bottom in the 141.000-141.200 area. A strong buy signal bar and confirmation to provide us with enough probability to enter a long trade. It's reasonable to scalp at a 1:1 Risk/Reward Ratio with hesitancy that this is truly a reversal or even a trading range. We can scalp for now and wait for a third test of support to give us even more probability for a swing trade at a 1:2 or 1:3 Risk/Reward. Stop loss should be below the double bottom and take profit should be near the previous support, now resistance.
Until then, it's wise to wait for that support to reveal itself or the alternative, we break down for another 4th leg. At this time, we assess the chart and look for entries again.
💡 Trade Ideas 💡
Long Entry: 142.600
🟥 Stop Loss: 140.500
✅ Take Profit: 144.700
⚖️ Risk/Reward Ratio: 1:1
🔑 Key Takeaways 🔑
1. Strong Bull Response Candle followed by slightly lower low, third leg down.
2. Strong Bull candles at the end of the last run up, first leg up in Bull reversal?
3. Pulling back to previous low, look for Double Bottom or Breakdown to new Low.
4. If Double Bottom, look to Long 1:1 scalp half position size, may swing other half.
5. RSI at 45.00 and above Moving Average. Reversal Trade Opportunity, Wait for Confirmation.
💰 Trading Tip 💰
Trends typically have three legs in either direction. Signals of a reversal include strong buy or sell bars with large wicks, higher highs and lower lows get weaker, and responses to the reverse direction get stronger. Confirmation lies with double and triple bottoms with a strong candle closing on or near its low/high.
⚠️ 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 comment if you found this analysis useful!
-Joe Dean
Trader Engineering Course
**Available Now at TraderEngineering.com**
Trader Engineering Course
**Available Now at TraderEngineering.com**
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.