Critical CHF/JPY Resistance near 88.50, Potenial Sell

Last updated 10/13/2009 2:46 PM EST (GMT -5) 7 Comments

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Roger A. Stojsic

Technical Analyst, GFT

The CHF/JPY is approaching significant resistance as we have an emerging bearish Gartley pattern along with an intertwined bearish butterfly pattern both projected to complete near 88.50. As a matter of fact, both patterns are converging at the exact same pip value (88.49) based on the following Fibonacci/pattern convergence:

· 78.6% of X1-A (beginning of bearish Gartley pattern)

· 161.8% of X2-A (beginning of bearish butterfly pattern)

· 161.8% ABCD extension (where CD leg equals 161.8% of AB leg)

Watch out for any gaps and/or wide-ranging candles (2-3x's average) prior to the projected entry as these are signs that a continuation move may be in progress and may invalidate this setup. If triggered, the relatively tight stop-loss of 88.70 will be placed just above projected pattern completion. A move above this level without a correction down to the initial profit target (T1) would result in pattern failure thus increasing the odds of a potentially strong bullish continuation up to 127.2% of X1-A (near 90.44).

The initial profit target of 87.45 (T1) represents a 38.2% retracement/correction of the projected CD leg at which point stops will be moved to break even, and a final target of 86.78 (T2) sits just above the 61.8% correction of CD. Assuming this trade is triggered, we're looking at an excellent risk/reward ratio of 3.3 to T1, and 5.6 to T2.

Potential strategy: Sell if prices rally to 88.41 with stop-loss at 88.70 targeting 87.45 (T1, stop to break even), 86.78 (T2).

Comments (7)

rstojsic

October 14, 2009 at 08:48 AM ET

yes sir, the bfly on the aud/jpy looks pretty solid especially if the current tweezer top at 82.0 holds. nice work, engin.

rstojsic

October 14, 2009 at 08:12 PM ET

hi sana, yes this trade is still valid and should be listed under trades to watch...the aud/jpy is looking quite bullish at the moment (new YTD highs have just been achieved) with room up to around 85.60

engin

October 14, 2009 at 04:55 AM ET

good pattern... also there is 100 periods ema (in monthly chart) i am in.

and i am looking for short position in aud/jpy @8190 there is a bearish butterfly(1h chart) and that level also 100 periods ema (in monthly chart) also a few bearish signal in medium term on this pair.

what do you think about this pair Roger???

Sana

October 14, 2009 at 06:04 PM ET

hi rstojsic,,,

Can u pls let us know if this trade is still valid cuz we can't see this trade anywhere beside this articale.........and pls if u give any suggestion about aud/jpy pair will be greatly appreciated

djcash

October 15, 2009 at 06:00 AM ET

I placed this trade at the buy point and got stopped out a bit later as it shot up!!
Never mind, I'll try the next alert we get.
Dave

rstojsic

October 15, 2009 at 09:11 AM ET

do you mean at the sell point, right? the nice thing about trading these patterns--especially this specific type of pattern which contains a 161.8% ABCD extension pattern---is that you know whether your right or wrong in a hurry. i dont know about you guys, but the longer i am in a trade the more time i have to screw it up. :) the other bright side of failed patterns (again, especially when the 161.8% ABCD extesnion pattern fails) is that it significantly increases the odds of a strong continuation up to the next fib level. in this case the next test will be X1 near 89.35, and if broken, a move up to 127.2%-161.8% of X1-A near 90.44. 91.82 is likely. The next level of major resistance then would be the 61.8% of the massive drop (see weekly charts) nea 93.60

djcash

October 16, 2009 at 05:33 AM ET

Hi Roger, yes it looked like a good trade so I entered the trade by going short at the sell point at about 07:00 GMT (my price was 88.36). I was stopped out at 09:30 GMT at 88.70. I was using limit orders as I was away from my PC for a while.

The entry point looked pretty good to me as I monitored it for a while using a 5 minute chart. The candles "kissed" the entry point several times from about 01:00 GMT up until my entry at 07:00 GMT. I'm glad my stop worked so that I was out of the trade with only losing about 30 pips or so.

Now looking onwards to the next trade and FX360 alert.
Thanks for researching these trade ideas.
Regards
Dave

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