CADJPY: Potential Head and Shoulders top forming | Forex Factory

CADJPY: Potential Head and Shoulders top forming | Forex Factory

CADJPY: Potential Head and Shoulders top forming

From thinkforex.com

With weaker oil, soft manufacturing data for Canada and inflows to JPY with Euro uncertainties then CADJPY is an ideal shorting candidate. Technically CADJPY may offer a decent opportunity to get short with several areas of resistance to consider fading into. The 96.0 high respected the bearish trendline form the Dec '14 high and may also form the 'Head' of an H&S top formation. Price currently resist above 93-93.20 support which raises potential for a retracement (and 'RS' to form). The Canadian Dollar had a temporary reprieve form 6yr lows following a rebound in Oil. This rebound is now under question as Oil ... (full story)

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Feb 4, 2015 7:06pm

This guy is a rookie. I don't care if he claims to have "x" years of experience. It will only mean he had one year of experience repeated "x" times!

He is using an H4 chart, clearly depicting a long and strong run down. Any rookie should know you cannot have a Head & Shoulders at the bottom of such a run!

An inverted Head & Shoulders is all that can be at the bottom of such a run, and this isn't one!

Suddenly, I feel very unsure about the credibility of this broker, allowing someone who doesn't know what he is doing to represent them and publish under the broker's name.

Feb 4, 2015 8:40pm

Quoting ThinkForex_MS

Disliked

I personally found that if you look at 'true' definitions of TA patterns you spend more time analysing than trading. Over the years I have relaxed many of these 'rules' ,,,,,.

Ignored

//------

hey matt..... very well put...... head and shoulders are were we find them not were we want them.... and they look the way the market says they look and seldom the beauty queen figure we expect.....

took the time to carefully read half a dozen of your prior articles and compare them with todays charts..... will read the rest....

you seem to have a keen eye ......h

Feb 4, 2015 7:42pm

I disagree on a purely fundamental basis with this analyst's assessment that this is a good place to short merely because a "potential" head and shoulders top is forming. Regardless of whether this formation is actually present, it is entirely possible that the vast majority of the move lower has occurred in light of the breakdown in oil prices (which started months ago) and the Canadian Central Bank's surprise rate cut. Given the fact that the rate cut has been largely digested by the market, it is likely that Loonie strength or weakness will largely oscillate on short-term time scales with oil prices, which have appeared to have bottomed around $40/bbl. and are likely to stay in the vicinity of that price, regardless of speculators' desires to push the price higher, temporarily or otherwise (although it is likely that Canadian economic data, going forward, will be weak for some time to come due to the large role that oil plays in their economy).

(On a side note, I wish these so-called "professional" analysts would at the very least proofread their copy before posting it or have a native English speaker do so. The thing is filled with grammatical and spelling errors which is a major detraction from the "pitch".)

Feb 4, 2015 7:47pm

Quoting ThinkForex_MS

Disliked

It’s not a head and shoulders yet – hence the word ‘potential’.

And who says the run is over? May be, maybe not. That's up to the market.

Ignored

Now that, I will agree with ... .

Could be worth short scalps from the descending trendline ... .

(Small jab on the proof-reading. I was an English major, soooo ... . We're anal about that stuff.)

Feb 4, 2015 7:52pm

Quoting ThinkForex_MS

Disliked

It’s not a head and shoulders yet – hence the word ‘potential’.

And who says the run is over? May be, maybe not. That's up to the market.

Ignored

All the criticism aside, it's always worth posting set-ups (at least to me). I traded this pair for quite a bit and then it fell off the radar (moved onto other favorites).

Your article prompts a second look at the pair ... .

Feb 4, 2015 7:57pm

Quoting ThinkForex_MS

Disliked

Which makes your English superior to 90% of English natives.

Something for me to improve on and perhaps not be so eager to hit 'publish'.

All good.

Ignored

And probably superior to about 95% of the Americans (at least under a certain age). Texting has destroyed the English language ... .

Feb 8, 2015 1:13pm

I dunno ... . A short could still work out somewhere in here for the pair ... . 95.50-ish looks like resistance of a sort ... . May dip my foot in around there with a small position ... . It's just that CAD's been so jumpy on the back of oil prices ... . Brent appears to be moving towards $60/bbl. while WTI lags just short of $52/bbl., supposedly upward on news of "Iraq unrest" (when hasn't Iraq been "unrested"?). http://www.bloomberg.com/news/videos/b/83550fc1-c886-4aa2-bd28-ef5a7650cff2

Feb 5, 2015 1:56am

Quoting traderathome

Disliked

This guy is a rookie. I don't care if he claims to have "x" years of experience. It will only mean he had one year of experience repeated "x" times!

He is using an H4 chart, clearly depicting a long and strong run down. Any rookie should know you cannot have a Head & Shoulders at the bottom of such a run!

An inverted Head & Shoulders is all that can be at the bottom of such a run, and this isn't one!

Suddenly, I feel very unsure about the credibility of this broker, allowing someone who doesn't know what he is doing to represent them...

Ignored

And you're a pro sitting on millions yet quite active on Forexfactory. Oh the irony! Looks like that one red badge has stroked your ego a bit too much living in your false reality.

Easy to diss someone and their analysis. Prolly, makes you feel good about your pathetic performance & self.

And who says H&S (or inverted H&S) are reversal patterns? They can occur anywhere and at times indicate a continuation of the previous trend. Trading is not rigid and same goes with patterns. Given that you have a lot of time, why not do yourself a favor and check back on past patterns. Some perfect text book patterns fail while the not so perfect patterns validate.

Feb 4, 2015 7:41pm

Quoting traderathome

Disliked

You cannot have a Head & Shoulders at the bottom of such a run!...

An inverted Head & Shoulders is all that can be at the bottom of such a run...

Ignored

It’s not a head and shoulders yet – hence the word ‘potential’.

And who says the run is over? May be, maybe not. That's up to the market.

Feb 4, 2015 7:45pm

According to Peter Brandt, for a formation to be a real H&S, the two shoulders must overlap, at least partially. The way he is drawing the potential right shoulder does not overlap at all with the left shoulder. Not a real H&S potential in my book.

Feb 4, 2015 7:47pm

(On a side note, I wish these so-called "professional" analysts would at the very least proofread their copy before posting it or have a native English speaker do so....)[/quote]

Fair comment - apart from the 'native' speaker bit...

Feb 4, 2015 7:54pm

Quoting ZebraSquirl

Disliked

(Small jab on the proof-reading. I was an English major, soooo ... . We're anal about that stuff.)

Ignored

Which makes your English superior to 90% of English natives.

Something for me to improve on and perhaps not be so eager to hit 'publish'.

All good.

Feb 4, 2015 8:01pm

Quoting Taiyin8

Disliked

According to Peter Brandt, for a formation to be a real H&S, the two shoulders must overlap, at least partially. The way he is drawing the potential right shoulder does not overlap at all with the left shoulder. Not a real H&S potential in my book.

Ignored

You raise a valid point here and something I'd like to elaborate on. It comes down to analysis vs trading.

I personally found that if you look at 'true' definitions of TA patterns you spend more time analysing than trading. Over the years I have relaxed many of these 'rules' to validate patterns and find that really I am just looking at the price action, relationships between swings, trajectory, momentum etc. to put a trading plan together. Use levels to confirm breaks to enter or manage the trade.

So whilst we could say this isn’t a true H&S, if price does rally towards the bearish trendline and reverse below the blue trendline, I see a potential trading strategy and potential of a higher reward / risk ratio.

If I’d have referred to it as the ‘Matt’s wonky potential H&S pattern’ it may have been more accurate but the idea remains the same.

Feb 4, 2015 9:57pm

Quoting hayseed

Disliked

//------
Took the time to carefully read half a dozen of your prior articles and compare them with todays charts...

Ignored

Thanks for taking the time hayseed!

TBH on the rare occasions I see textbook patterns they tend to fail.

Trade well

Feb 5, 2015 10:54am

This was a good look on an opportunity. The "ascending right shoulder" is hitting a channel line, just not precisely the channel drawn.

I got short the contract just now with a limit and a tight stop. Betting on the NFP keeping in mind the oil price risk.

Anyway I liked the idea. Good stuff.

Oh and "traderathome" is correct. You cannot technically deem the formation a head and shoulders. However, it is posible that a reverse head and shoulders is forming that will break the channel line sometime down the line that will probably end up somewhere around the 99.00 - 100.00 pivot. So one could suggest that this is the beginning of a bottom formation.

So the longer term play would be to bet on the bottom formation with a stop in at 91.00. But who can hold a trade that long with leverage? So the high probability short term play is what the author suggests in the article. And you msut keep in mind that japanese investors are probably going to migrate to higher foreign yields, if they haven't already in their reluctance. There is just so much security a "negative yield" can offer before it just makes no sense.

I don't like giving too much trading advice on this forum because trading is risky. But "traderathome" is a little too hostile this time over an opinion of price action.

Feb 6, 2015 9:35am

I take it back, the author was wrong. Worst potential and incorrect H&S ever. Got away with a few pips avg on a cover after the hourly doji.

Never assume that a H&S can form at the bottom.

The brightside? Possible bottom. Yeah!

Feb 6, 2015 11:06pm

Quoting usdoutlaw

Disliked

Never assume that a H&S can form at the bottom.

Ignored

Well that's just the thing - the H&S was never confirmed, as this would have required a break below the blue neckline which didn't happen.

And you do not know it is a bottom until after the event.

As for trading it you either jump in before (as you did) for a higher reward / risk ratio, but at greater risk. Or wait for confirmation of the pattern, switch to smaller timeframes and trade in the short side.

Sorry it didn't work out for you - it didn't work out for me either, but risk management kept losses small.

Feb 6, 2015 11:24pm

In contrast, this one turned out quite well...

http://www.thinkforex.com/newsroom/blog/december-2014/eurnzd-head-and-shoulders-fractal

But of course, had it not worked, could have also been labelled a 'hindsight bottom'.

Nothing wrong with expressing your opinion usdoutlaw so don't need to be afraid of jinxing yourself by speaking up. But where it does get sticky is when one states 'this will definitely happen' and 'there's NO WAY that will happen...' (as we frequently see on forums) as nobody truly knows for certain what is going to happen in the next tick. Swissy being a good, recent example!

Have a great weekend all and good luck with your trades next week

Matt

Feb 8, 2015 3:44pm

I am not sure what you are getting at in your article/chart analysis but it's a stretch to call that a "H&S" formation because the head and right shoulder are so indistinct that it would be better to interpret it as consolidation. Now the monthly chart is more of a clear case for your "H&S" but the January "super" doji / hammer basically diminishes any further downside probability. Plus any more downside would in this pair, in my opinion, would have to be event driven rather than price action / expectation driven.

But if you look at the most recent daily chart for the EURNZD in the month of Jan 2015 you will find a classic inverted H&S bottom formation. Plus It has come in right to the inverted neckline ... 1.53 - 1.54.

If the eurozone (bearish EUR) wasn't such a mess and if the NZDJPY weekly 10 and 20 EMAs weren't on the verge of crossing to the downside (bearish NZD), I would consider betting on a bottom formation. Furthermore the weekly chart suggests a quick cup and handle formation that can possible push the contract up to the high 1.50s low 1.60s just in time for the event risk of the "grexit" in March. So in the near future I would expect a couple weeks of consolidation until a some type of NZ rate clarification and then a leg up until the clarification of the "grexit" in March.

But again the dual risk this pair experiences is so high, and the spread is usually so wide that I wouldn't even touch it. And it would be borderline irresponsible to even suggest any type of direction in a published blog post/article aimed toward retail traders. I would treat this pair as mildly exotic and expect only "big boys" with "big boy" accounts to be able to handle the price action.

Quoting ThinkForex_MS

Disliked

In contrast, this one turned out quite well...

http://www.thinkforex.com/newsroom/b...ulders-fractal

...

Matt

Ignored

Feb 8, 2015 7:02pm

The initial H&S hit target quite quickly after that post. The larger one is debatable.

I made a point of starting with "A trade idea to satisfy those with a much longer holding time" and "This could be considered more of an investment than a trade..." to appeal to those retail traders on larger timeframes and larger accounts.

I am myself a retail trader, do not have 'deep pockets', but my risk management allows me to partake. For me, the spread in relation to pips risk is more important than the spread alone. I speak for myself here though.

As for direction, people complained when it lacked one. So it is a bias and still requires a trader to find a signal in line with their own trading (and as you have done use your own filtering)

Anyway, slightly off topic but thanks for your input usdoutlow - trade well.

Matt

Trader#0EF8

Feb 4, 2015 11:13pm

Dear "TraderAtHome"
Some civility please!
Let's criticize others for the facts.
Look into the past on this CADJPY pair. You will find this pair has used this 'Humps" or "Head and Shoulders"-like formation numerous times in the past.
- Let the past be your guide to the future. -
What the Big Banks have done in the past - they can be expected to do in the future!
In this case - past actions after the "Humps" has driven this pair DOWN - just like the author of the Think Forex article has suggested.

Trading is Life . . .

Trader#53EC

Feb 5, 2015 10:14am

Trouble is,every pattern is based on percentages of success and failure,that's what makes trading difficult.Sometimes a good trader has an advantage with fundamental data but that's not a guarantee either.We live with probabilities and correlations.Never forget about risk,it manifests itself differently in various places.

Feb 6, 2015 9:37am

And possible ascending inverted H&S.

Now i will shut up, because advice is just too dangerous of a game!

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Feb 4, 2015 6:40pm
Posted by
ThinkForex_MS

Technical Analysis

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