USD/JPY broke out of its descending wedge last week in a fantastic move toward the Resistance Zone (Now the Support Zone). We capitalized on that trade, you can find the details in the chart below. Are we ready for another long?

USDJPY Trade - Last Week:

How do we trade this? 🤔

We finished last week with a wild doji candle (one bar trading range) just above the 30EMA. That may have completed the first leg up in this new bull trend which has yet to be determined if it's a pullback on the macro bear trend or the start of another push up to higher highs. If it's a pullback in the bear trend, then we should expect no more than two legs to the upside before the price falls down again. If this is another run toward 152.000, then we should expect at least three legs to the upside.

We do have justification to long on the Daily or 4HR. The Daily chart shows weakness above the 30EMA, the 4HR chart shows us stuck just below the 200EMA as shown in the following chart:

USDJPY 4HR Chart:

Both RSI's call for a pullback; the 4HR is high and below the Moving Average, and the Daily is around 50.00 but has a gap back down to the Moving Average. We need to wait for a pullback to happen which will likely bring the price toward the bottom of the Support Range around 143.800. At that price area, we need to look for a strong buy signal telling us we're going up for a second leg.

Until then, it's best to wait on the sidelines for more price action and an optimal entry.

💡 Trade Idea 💡

Long Entry: 144.350/b] 🟥 Stop Loss: 143.100
✅ Take Profit: 146.850
⚖️ Risk/Reward Ratio: 1:2

🔑 Key Takeaways 🔑

1. Breakout from Descending Wedge
2. 1st Leg up Potentially Complete
3. Wait for Pullback to Bottom of Support Zone Area.
4. Look for Bull Confirmation near the 143.800 Area to Long.
5. RSI at 52.00 and above Moving Average. Bias to Long, but wait for Gap to Close.

💰 Trading Tip 💰
Traders often get trapped trying to trade the end of a second leg thinking a third leg is coming. Pullbacks often have two legs and when the third leg fails, it's in part because the traders stop loss is hit, causing the price to go the opposite direction of their trade and continuing the macro trend.

⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!

Find me at TradingView.com/u/TraderEngineering/

Like 👍 and comment if you found this analysis useful!