head and shoulders EUR/JPY | Forex Factory

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head and shoulders EUR/JPY

  • #1
  • First Post: Apr 9, 2008 5:26am Apr 9, 2008 5:26am
Im trading the current brake down on EUR/JPY based on this head and shoulder on the hourly chart. There is still an opportunity to enter on a possible retest of the backside of the trendline as price has currently found support at the S1 pivot(london). There is macd divergence on the four hour chart backing up the hourly chart pattern and price is currently trading below the central pivot. The recent carry trade/equities rally is really pushing it I believe, and is overdue for a correction . Who knows it could be the start of the next leg down and push into the 1.40's in another panic sell off. Of course a break north of the head will put the next crash on hold for a while. What do you guys think?
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  • #2
  • Apr 9, 2008 6:05am Apr 9, 2008 6:05am
Dont you just love it - not!! thats what you get for counter trend, top picking trading. Its not over yet but its sure looking scary. Only a failure at the right shoulder level can save me now
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  • #3
  • Apr 9, 2008 6:21am Apr 9, 2008 6:21am
any takers for a Bullish pennant continuation pattern? Doh!
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  • #4
  • Apr 9, 2008 6:50am Apr 9, 2008 6:50am
Quoting M.A.C.Doug
any takers for a Bullish pennant continuation pattern? Doh!
Not yet. Take a look at the daily and let's see what it does at this resistance level from late Feb.

I'm a little biased to the downside.

Just an opinion (from someone who has never traded this pair)

PS - thanks for the heads up! (No pun intended).
  • #5
  • Apr 9, 2008 7:13am Apr 9, 2008 7:13am
Ok price fails to hold above the downtrend line after a test of the right shoulder level. I am not out of the woods yet but I am in with a chance of a consolidation allowing the 4 hr macd divergence to kick in. If price can get below the central pivot I am looking good to exit this trade with a small profit at least.
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  • #6
  • Apr 9, 2008 7:24am Apr 9, 2008 7:24am
I love technical analysis. However the first thing I ask myself anytime I start analysing is simply "what is the defined trend direction?" Definition of an Uptrend is: Higher Highs and Higher Lows. Downtrend: Lower Low's and Lower Highers.

We were in consolidation with Lower Highs and Higher Low's, however we've just defined a new trend.



Sorry for raping your picture.

Then again, it's done some nice whipsawing. I'd imagine holding a trade in either direction will pay out right now.
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The basis of a democratic state is liberty. ~ Aristotle
  • #7
  • Apr 9, 2008 7:59am Apr 9, 2008 7:59am
Quoting Vensik
I love technical analysis. However the first thing I ask myself anytime I start analysing is simply "what is the defined trend direction?" Definition of an Uptrend is: Higher Highs and Higher Lows. Downtrend: Lower Low's and Lower Highers.

We were in consolidation with Lower Highs and Higher Low's, however we've just defined a new trend.



Sorry for raping your picture.

Then again, it's done some nice whipsawing. I'd imagine holding a trade in either direction will pay out right now.
I thought I was the only person "left" using HH/LL lol.

Ascending triangle on 1h E/J. Considering currently strong trend on this pair, favoring continuation of it wouldn't be way-off, IMO.

Measuring high/low (100 pips) inside this pattern gives us a (approximately ) target of 162.50 if breakout happen to the upside.

Am I missing something ?
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  • #8
  • Apr 9, 2008 8:01am Apr 9, 2008 8:01am
The higher low had not formed when I took the trade. I already have the support trendline drawn on my picture after they formed so I dont see the value of your post. Your analysis is with hindsight well after the trade was in play. Anyone can be a good trader on the left hand side of the chart but it offers limited value as a teaching tool and of course zero profit. I do agree with you on the odds of the consolidation continuing, at least for the session, being good - I am holding for the time being
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  • #9
  • Apr 9, 2008 8:12am Apr 9, 2008 8:12am
Well, I think I mentioned that we were in consolidation. Thats not hindsight, that's what it was at the time of entry. It was also breaking the trendline that you entered off of. I agree with that. However it had not formed a defined trend. If it had broken the Trendline enough to go create a Lower Low and THEN retrace to the backside of the trendline. I would probably have risked an entry off of that backside tap of the trendline. At that point we would have had a defined down trend and a break of the trendline as well as a tighter risk/reward that backside taps usually produce. What actually happened was that it broke and then retraced to the backside While creating a higher low. I'm not trying to offend you or anything, however I would have been more suspicious of it retracing to my entry if in doing so it created the defined Lower Low and Higher High.

None of that is hindsight. It simply is. This higher low and higher high is the first defined trend we have had in a while on it. And it is current. Not hindsight.

I think this is why I rarely comment on analysis threads anymore.
The basis of a democratic state is liberty. ~ Aristotle
  • #10
  • Apr 9, 2008 8:19am Apr 9, 2008 8:19am
I agree - If i was not so busy posting the trade here I may have paid more attention after the higher low formed at support. It was a good warning to cut the trade but I didnt notice at the time - its a pity you werent here a little earlier, I have a simultaneous long on AUS/USD and had I dithched the EUR/JPY trade that would have been good trading
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  • #11
  • Apr 9, 2008 8:24am Apr 9, 2008 8:24am
HAHA, well I'm not trading these crazy JPY's right now anyway. So had you not posted I just wouldn't have seen it at all.

My father and trading partner loves the GBP/JPY. He asks me if I'm in it daily. I think I described it yesterday at lunch as "It's kind of like throwing a lasso around a wild stallion. It doesn't matter if he goes in the right direction or wrong direction, but your gonna get there fast and be dragged through the mud in the meantime."

I thought it was pretty good analysis.


EDIT: Wow... that sounded rednecky.
The basis of a democratic state is liberty. ~ Aristotle
  • #12
  • Apr 9, 2008 8:27am Apr 9, 2008 8:27am
Hey, I'm in that AUD/USD as well. Keep that one up.

My first entry on the AUD was January 7th. I just keep entering on dips toward parity with the dollar. Pays me interest daily and I'm in the direction of the trend.
The basis of a democratic state is liberty. ~ Aristotle
  • #13
  • Apr 9, 2008 8:35am Apr 9, 2008 8:35am
You know what the real problem was - I was blinded by the head and shoulder + macd divergence and was unable to absorb new information that contradicted my viewpoint. I even stated that price had bonced at S1 support level and I remember raising my eyebrow after that happened. But I just thought it was price moving up to test the back of the trendline. I completely missed the higher low warning although I was staring right at it. It is very difficult to see clearly when you already have a belief about what is going to happen. Now that is a good lesson. Not sure how best to overcome it but at least I am aware of it
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  • #14
  • Apr 9, 2008 8:47am Apr 9, 2008 8:47am
Quoting M.A.C.Doug
It is very difficult to see clearly when you already have a belief about what is going to happen. Now that is a good lesson.

Worth every penny.

I'm glad you figured it out though, my comments were looking at it from a third party perspective. You were the one already in the trade. So you needed to justify this as a retracement and not as a new Up trend formed against you.

The only reason I said something (And I really have been staying away from commenting on Analysis threads lately), is to get you to realize that before holding it any longer.
The basis of a democratic state is liberty. ~ Aristotle
  • #15
  • Apr 9, 2008 12:35pm Apr 9, 2008 12:35pm
Hm I think I'm having a deja vu.

Anyhow. Keep in mind you can't ask for trading advice..

As for direction etc - imho once again it comes down to USDJPY and whether that can outmove EURUSD. If so, EURJPY will go down. It's that simple.

And who gives direction for the carry cores? S&P / DJI. And the former pinned a bit ago. Question now is how long we'll continue in the downward direction.

Funny how lately stocks and the USD move in synch(higher stocks = higher USD and vice versa, especially on the carry)

Also compare CJ, GJ and EJ and realize that there are not so good, good and really good pairs to use for carry weakness...oddly enough we(= I've seen it in others and I've seen it in me) have a tendency to try and short the strongest
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Trust price. Know yourself.
  • #16
  • Apr 9, 2008 1:15pm Apr 9, 2008 1:15pm
Quoting SeekingLight
Funny how lately stocks and the USD move in synch(higher stocks = higher USD and vice versa, especially on the carry)
I think that has to do with the USD status changing from being a high-yielding currency to a low-yielder over the past 6 months.


Quoting SeekingLight
Also compare CJ, GJ and EJ and realize that there are not so good, good and really good pairs to use for carry weakness...oddly enough we(= I've seen it in others and I've seen it in me) have a tendency to try and short the strongest
If you're referring to GBP/JPY then I think it has to do with GBP fundamentals being the weakest, as well as it being the highest yielder of the group.

EUR is being seen as a safe haven these days, so it doesn't get hit as hard during carry sell-offs (plus it was never really considered a "high-yielder" anyway).

CAD is geographically forced to be the largest US trading partner, for better or for worse. Since the Canadian economy is not nearly as diverse, resilient and flexible as that of its larger Southern neighbour, CAD depends heavily on US trade, so if demand for Canadian raw materials drops (eg. lumber for housing) then CAD suffers. On the other hand, oil tends to move higher during carry sell-offs, offsetting some of the CAD losses, but again lower demand from the US reduces even that effect despite global demand remaining high. (increasing Canadian oil exports to China should take care of that last bit).
  • #17
  • Apr 9, 2008 2:02pm Apr 9, 2008 2:02pm
I'd just break it down to: EUR in rising rate cycle still, GBP and CAD declining.

That's usually the most telltale thing imho, regardless of why it's being done
Rate differentials are easiest to keep track of, too

But I suspect all the localized details leading to those(rates) in consequence can be equally justified as cause...as you know, I indulge in fundamentals out of interest(=boredom and staying informed), but really have no real clue

--

Btw, another thing I wanted to say, since I suspect that caused this thread in the first place:

MAC, make sure your sizing and entry reasoning is such that you can cope with it failing; i.e. make sure that regardless of how the trade turns out, you can know and feel you gave it your best and reasonable shot.
Once you start to doubt and manipulate around the trade, you run risk of ruining something that may end up working had one not interfered. Goes both ways of course, the other extreme is hoping something will turn around after it's shown it won't.
This is why it's so important to have as systematic an approach as possible, to get as far away from all this emotional involvement as can be.

I'm emphasizing this because it's something I tend to "cycle" through myself at times and it always helps making oneself realize overinvolvement and trying to find oneself back into "the zone" or whatver calls the tradeable state.
Trust price. Know yourself.
  • #18
  • Apr 9, 2008 11:00pm Apr 9, 2008 11:00pm
Absolutely. Most of the things I mentioned affect interest rates and interest rate expectations, which are still highly correlated with exchange rates over the long term.

I know you always play down your understanding of fundamentals, as well as its usefulness, but I suspect your interest goes beyond just "entertainment" value. You don't need to be a mechanic to drive a car, but it helps to understand what's happening under the sheet metal, especially when things go awry.

BTW UK wage inflation came in surprisingly weak so we should see the Bank of England continue to cut rates without much second-guessing.

Commodity fed inflation is increasingly being seen as "beyond a central bank's control" anyway.

But I digress... MAC, to be quite honest I don't really see your pattern as a clear H&S, but I do agree with you about the direction this pair is heading regardless.
  • #19
  • Apr 10, 2008 3:08am Apr 10, 2008 3:08am
How frustrating! the call was good as predicted by the 4 hr macd divergence but I cut the trade as I believed the probability had shifted against it. It was midnight here in Australia when I posted last and I had an early start so I took the loss and went to bed. I considered leaving a half position open but opted out altogether. I think the correct decision was made at the time but had I been able to keep watching, the subsequent failure at the highs would have put the odds back in favour of the short Price went straight to support over 100 pips lower while I was at work today (asia). I hope someone was watching and managed to get something out of it. They say its better to miss a move than be in a trade you dont want to be in and I agree, at least I didnt go long on the strength last night! I got some pips back on AUD long and a very valuable lesson. I thank all the posters who offered there opinions and advice on this trade and trading in general in this thread. It is a real honor and pleasure and to hang with you guys
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  • #20
  • Apr 10, 2008 4:09am Apr 10, 2008 4:09am
Quoting M.A.C.Doug
How frustrating! the call was good as predicted by the 4 hr macd divergence but I cut the trade as I believed the probability had shifted against it.
Quoting SeekingLight
Once you start to doubt and manipulate around the trade, you run risk of ruining something that may end up working had one not interfered.
Trust price. Know yourself.
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