CADJPY Week Dec 14th-19th

CADJPY Post Market Homework & Pre Market Preparation – 14th-19th

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Possible Buy trade Levels: 102.00 / 101.89 – 101.34

Possible Sell trade Levels: 103.18 / 103.60

These observations are to understand the big picture in CADJPY.

Daily Bar Chart: before the open Sunday Dec 14th

• Of the current 1362 pip strong bull run up CADJPY last week saw a 444 pip retrace down from the high put in earlier in the week.
• Of the current up impulse leg the 38% retrace is at 101.348 which also is a potential price action support level.
  On the daily bar chart, price has rotated below the 5,10, and 21 ema lines, closing below them on Wed, Thurs, and Friday. Price may make it up to the 10 EMA and if it does that could be a high probability short trade.

Before Sunday’s Open D1

Weekly Bars – CADJPY

Monthly Bars – CADJPY

Weekly Bar before the open Sunday Dec 14th

• The one-time framing of weekly bars stopped last week.  Last weeks weekly bar engulfed the previous 3 weeks highs and lows.
• The weekly bar closed below the 5 ema line but above the 10 (101.89), which it has not touched since the end of October. A buy trade on or near the 10 ema may be profitable.
• The 2013 high at 101.110 was broken back in the first week of November, but it not been retested since being broken.  Buyer might be waiting for this level and it may provide price action support.
• Price is well above last quarters high and the current quarters open.

Monthly Bar before the Open Sunday Dec 14th

• Even though the daily bar and the weekly bar saw bearish selling last week, the monthly bar still is well above last months open though it is a down bar at present.
• Potential target down is last years high at 101.053 which is also close to the 5 month ema line.
• Price is well above the current years open.

What did not happen is insightful, too

In Forex trading, when studying price action:

It’s not only about what happened, what did not happen is insightful, too

When I look at the charts it is easy to only focus on what happened, but often there is invaluable insights in what did not happen.

Only focusing on what happened may limit my ability to really read what is happening.  Here is a quick video that may assist in illustrating my point.  Then below is some chart examples.

Here are some price examples from the chart of what happens when I can identify where price does not go.

Understanding the relationship between where price does go and does NOT go will help in placing stops and limits.  Trading levels instead of individual bars and time periods will also make me a more patient trader allowing to filter out the noise.

If not one way, then the other

If not one way, then the other

If not up, then down!

Low risk high probability long trade set up trade.

Structure support / resistance, 21 EMA

Using structure support and resistance levels to determine if break of 21 ema indicates a trend change

Thursday, USDJPY, Update:

USDJPY is still trending bearish. No sign of trend reversal

• No Lower highs has been broken and price is trading below the 21 ema.  A new LL has been set.
• Price had a .382 retrace up but nearing a near perfect .382 AB=CD completion.

Tuesday, USDJPY, 2-hour chart

• USDJPY has been on bullish upward trend since October 2012.  However, the last three weeks or so price has been moving down almost an 800 pip drop.   When will the fall stop, turn around, and head back up?

Trend Trading using the 21 EMA

• One the chart above, I can see price moving down and the 21 ema is following behind it.  A few times price has broken above the 21 ema line but only to resume its bear trend further down.

Why?  How to determine when a 21 EMA break signals a trend turn around?

• The best answer is to look at structure support and resistance as defined by LH and LL, in this case.
• When price break above the 21 EMA, I need to ask: “did it also break an earlier lower low resistance and or a LH.”

So, from the above chart

• at the blue line labelled structure res 1, as price broke above the 21 ema it did not also move up past the structure res 1 level.  For a signal to be valid that price is going to turn around and head further up this level needs to be broken, as well.  It did not, the structure res 1 held, and price moved further down with the 21 ema nicely behind it all the way.

• Similar scenario at structure res 2.  Priced moved down further pulled back up and closed above the 21 ema line but could not break the previous LL support now turning resistance.  For price to have pulled further back up this level would need to be broken.

• Again, the same pattern played out at structure res 3.  Priced moved further down setting a new LL then pulling back up and breaking the 21 ema line and trading above it until it reached the previous LL support now turn resistance.

This pattern will continue until the 21 ema is broken along with a previous support turn resistance and Lower High all have break and close above.

Yes, one may say there were pips to be gained after price broke the 21 ema.  This would be true but that would be counter trend with bigger riskier stops.  The higher probability lower risk trade may be taking trend continuation trades at the resistance level.  And, I prefer to have multiple reasons to take a trade.  Breaking the 21 ema is not enough by itself.

My thoughts and Emotions

The most important ingredient to sustained profitable trading is controlling my emotions. What I think about will effect my actions.  The thoughts in my mind will effect my actions.

How do I feel?

Evaluating 3 EMA: 21, 100 and 200

I use only 3 exponential moving averages (EMA) and they must all be used together as one indicator.  At a basic level, when price is above all three EMA’s the trend bias is up and when price is below all three EMA’s the trend bias is down.

Aligned Up:

• When all 3 EMA are aligned 21 above 100 and 100 above 200 then bias is to the upside.
  Expect support levels to hold until alignment changes
• Aligned Down:
• When all 3 EMA are alsigned 200 above 100 and 100 above 21 then bias is to the downside.
  Expect resistance levels to hold until alignment changes
• Buy above all three EMA levels wait for it to fall to support levels to buy. 
• When price is trading below all three indicators the trend bias is down and I should look for selling opportunities.  Sell when price is high and at resistance levels.  

21 EMA

When price is above

100 EMA

200 EMA

EMA Alignment

This is my trading journal, it is intended only for my use to help me 
organize thoughts and ideas for successful trading.  
Nazaar.