USDJPY → On the way to 152.000? Let’s Maximize Profits!
USDJPY is on its third leg up in this bull trend and heading toward a Resistance Zone at 149.350. Should we consider shorting the resistance? Or longing a pullback?
How do we trade this? 🤔
Longing a pullback is the more probable trade. While we are looking at the third leg up in this bull trend (a situation where we may want to refrain from longing), we do not have any sign of a sell signal in sight. The RSI is over 70.00 near a Resistance Zone which means we should wait for a pullback toward the bull trend line near the 147.500 area and wait for a strong bull response. The Resistance Zone is the result of a high-volume price area; look to the left on the chart to see that data.
Once we see a strong bull bar closing on or near its high off of that trend line, it's reasonable to take a long position at a 1:2 Risk/Reward Ratio. Take half profits at 1:1 Risk/Reward (149.600) just into the Resistance Zone, move your take profit up to the entry price to lock in profits, then swing the latter half of your position to 151.100 or until you see a sell signal near the previous high of 152.000.
The probability of profit weakens as the trend moves into the third and fourth legs and therefore, the position size of this trade should be smaller to reduce our initial risk.
💡 Trade Idea 💡
Long Entry: 148.100
🟥 Stop Loss: 146.600
✅ Take Profit #1: 149.600
✅ Take Profit #2: 151.100
⚖️ Risk/Reward Ratio: 1:2
🔑 Key Takeaways 🔑
1. Third leg up in a bull channel
2. Near a Resistance Zone
3. Gap back down to the Bull Trend line
4. RSI at 80.00 and above the moving average, supports a pullback
5. Wait for the price to come back down to the bull trend and bounce to enter a trade
💰 Trading Tip 💰
The longer a trend continues after 3 legs, the probability of that trend continuing lessens. Because of this decreased probability, we ought to reduce our risk when entering trades.
⚠️ Risk Warning! ⚠️
Past performance is not necessarily indicative of future results. You are solely responsible for your trades. Trade at your own risk!
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