USDJPY H&S alert

Nice piece on USDJPY, ft. Thanks. Not sure about the H&S though.

I must admit I had this move down as a wave 4 so I am expecting one more final high before a substantial drop. I have the trendline at bang on 95 now so maybe a drop to there before a final leg up?

Good afternoon everyone. The USDJPY looks quite interesting. I was reading in December how this was going to be the year for Japanese stocks, isn't hindsight fantastic?! None the less, is it still in wave 3, is wave 4 starting or finishing or is wave 5 about to start? I've lost count.
Over the last three weeks 100 level has been major resistance and arguable the defining line for short stops and initiating longs- if your brave!

The weekly chart shows the 261.8% extension holding with a possible triple top.

There is a doji or shooting star followed by what looks like a hanging man and then last week a bearish engulfing candle.



There is also a gap up and the gap has been filled and broken to the down side.



Now, in light of the 2.618% extension, the triple top and the bearish engulfing candle I am starting to lean towards the gap being an exhaustion gap. (For those who have Murphy's TA book pages 96/7) Let the debate begin!
The key to the short is the 100 level, if that is exceeded and the day finishes above that I think it is fair to say shorts are off for time being and it will probably keep going to 200 at this rate

However on a serious note, I have read several Market and Elliott Wave forecasters and they all say it has another jump higher to go before it corrects. Time will tell.

For nice easy interpretation it could do with a nice gap down to form an island reversal. Looking at the news this weekend I don't see anything which could cause that as it stands. From what I have read, the opinions of a higher USDJPY is based on the Indices going to new highs.

On a short term basis there the trendline from Aprils action has beeen broken and brings in to play the Feburary trendline around the 9380-9400.



Currently there are no further significant bearish P&F targets on the 1 minute time frames. That would suggest that there needs to be a little more price movement (whilst staying below the highs) to then create the spur for the next bearish target.



Can the wave theorists see 3 waves forming? If the current bounce from 9752 being wave 4, the 9845 level will be critical.



To bring my musings to a close the 100 level is the most important!

Best wishes all and hoping for a jolly week ahead!

ft

One other thing, diver...

You reckon that it should have targets of 82.00 or possibly 80.50. I'd be interested to know where you get these from. Given that the price has reached the 161.8% extension of what looks to be a wave 1 up from 75.63 tp 84.178, sure we'd be due a wave 4 retrace which should not go below that 84.178 top?

Personally, if this trade works out, I'm targeting 85.74 which is the 38.2% retracement of the the last rise.

Hi Diver and thanks,

In Spring 2011 I did a lot of research and backtesting on the correlation between RSI and waves. I mainly used the Dow but checked on a few other instruments too. I concluded that you cannot 100% rely of RSI divergences to call wave 5 tops but that they do occur quite often and I've been using this method ever since.

One thing we have to be careful of, however, is to know which degree waves we're dealing with and matching that with the right timeframe chart. For example if you're looking at the hourly chart and see a bearish RSI div between what looks like wave 3 and 5 on the same timeframe chart, the chances are you're actually still in subwaves of a larger degree wave up. I've been guilty of this a few times and sold thinking it was a top, only to see the price race on and then realise I'd sold at the top of a wave 3 instead of a wave 5 (the divergence came between subwaves 3 and 5 of wave 3). It's not the end of the world, but you could miss an extended wave 5.

Anyway, that's just how I think about it.

You say you asked yourself the question about why you didn't get in on the test of the wave 1 peak on 13th Nov. I did get in on that but failed to let the trade run, partly because of exactly that issue I talked about above. The other factor was that I only had a single position at that level so I could hedge my bets. This is where remo's 3 contract method is so clever. I'll try not to make these mistakes again.

ATB

screencast.com/t/DGKW1I71o





Sorry Jacko, I should have said the reason I feel there is a little more upside here is the 15M chart shows wave (v) of 5 a little shy of the top of (iii). Time will tell huh?

Hi Jacko,

I reckon you're spot on with your analysis but I wouldn't be surprised if it went just a little further, maybe 91.5, before turning back to around at least 82.00 and possibly 80.50. It'll probably want 3 swings to get there though.
The triple divergence was due to the nested nature of the current advance. There is always a divergence in an impulsive move between waves 3 and 5 due to the very nature of the structure in that the fifth wave is struggling to make progress against the wise money getting out and taking profits.
Like you I asked myself the same question,'why oh why didn't I get in on the test of the initial wave 1 peak back on Nov 13th last???'