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EUR/JPY Forming Counter-trend Selling Opportunity

Last updated 4/13/2009 6:35 PM EST (GMT -5) 0 Comments - Add your comment

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Bradley W. Gareiss

Technical Analyst, GFT

The EUR/JPY has been trending up for the better part of 2009.  The pair has been moving up in a nice channel seen on the 8hr Chart.  However, a bearish Gartley is forming that suggests trading against the trend in the short term.  The pattern isn't suggesting that the uptrend is over.  The trade would be relatively short term in the context of the channel.  If the trade enters, it would likely be able to hit both profit targets before reaching the bottom of the channel again.

We are looking to sell the EUR/JPY if it rises to 134.84 (Point D).  Point D is located at the convergence of the following points:

We have extended the CD leg to 127.2% of AB in anticipation that the uptrend may create momentum that moves the EUR/JPY up higher than the AB=CD.  The extended ABCD meets up perfectly with our two Fib ratios, which makes the extension more viable.  We will now go over what to watch for assuming the pair continues rising to our entry at 134.84. First, we need to watch how quickly CD completes.  We are looking for the CD leg to rise slowly and enter the trade near our hypothetical entry on the 2hr Chart.  Long bars are exceptionally important to watch for because we are already trading against the current trend.  If there are long bars near the completion of the CD leg, we will not take the trade.  If the pair comes within 20 pips of reaching our entry, does not enter, and reaches T1 before entering, the trade is invalid.  The trade is also invalid if the pair falls below 133.10 before hitting our entry.

To recap, we will look to sell the EUR/JPY at 134.84 with our stop placed at 135.48.  Our initial profit targets are 133.80 (38.2% of CD) and 132.95 (61.8% of CD).

8hr Chart - Trade is counter-trend.	2hr Chart - Bearish Gartley; sell @ 134.84.

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