DislikedHi BRV,
I thought I caught this reversal on the USDJPY but it didn't work out very well. On the 4hr chart I've identified what appears to be a strong resistance area between 105.68 and 105.90. The fib also shows the 50% retrace of the down move at 105.72. As price comes into the area I dropped down to the 1hr chart. Price goes to the top of the resistance band and then we get a red bearish candle. The next candle appears to be bearish also and I enter at 105.57 (lower red line). Price gets down to 105.43 but never really gains any momentum and starts to retrace. I think it's just a small re test and then price will drop from there. Price keeps going up and takes out my SL at 105.87 for a 30 pip loss. I thought this was going to be a text book reversal point but it turned out to be one resistance level too soon. How do you determine if you will enter a position when you get to a R or S level? I assume you just don't enter blindly when price gets to a S or R level. Are there any tips or advise you could share that would help identify or qualify turning points? The other question I have about this set up is it seems to go against everything you learn about trend trading. This is clearly an up move with higher highs and higher lows. Wouldn't it be a better set up to wait for the pullback to a support area and take a long position?Ignored
But the most important of all these levels, 107.10, was the was that ended up sticking (chart attached). Buying on this pair on a day like today is more or less a fluke, and one of those things you just have to be prepared for. The daily range on yen is over 225 pips - usually when you get to that point it will reverse. My first short position was somewhere around 106.24, which is around where we started to see the unexpected buying today. SPX was at a halt and oil selling seemed to be drying up for the day so I thought it was safer to enter, though I will admit I still had some reservations.
I would prefer to catch these reversal points in the direction of the trend, but sometimes, you just dont know if the trend is over or its going to continue. But waiting to catch the trend all the time would have also cost me a lot of money, as I make a lot of it on countertrend or reversal moves.
USDJPY broke some rules today based moreso on fundamentals than technical conditions, but on any average day, levels like 106.24, 106.68 will hold. It just happens and something you need to be prepared for just in case. Either way, if you look at a 5min chart you will see that price slowed down around these points. But massive orders coming in allowed to move higher.