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Do you trade engulfing candles?
#USDJPY has formed an engulfing candle on the daily timeframe.
In this video we explain how you could have traded this candle pattern.
Watch the video to learn more…
Hi, and welcome to this Blueberry Markets video update with me, John Kibbler, Head Currency Analyst.
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In this video, we’re going to take a look at USD/JPY. The reasons we could be seeing the market rally and why we looked at buying it in the first place.
We just identified that the US Dollar is at key support. So in the Forex Market Outlook and the video on Kiwi Dollar yesterday, we spoke about the fact that the US Dollar index is at 92 US Dollars. A huge important level on the US Dollar is that we actually saw a bit of rejection of that. So we were looking at the charts, and we were seeing what major currency pairs were at level, and we also saw the JP Yen at 104.
Now, 104 is a pretty big level on USD/JPY, which is somewhere just around here, and what we noticed was that the price had recently reacted to this area multiple times in the daily timeframe and what we had yesterday was a really nice bullish engulfing candle.
Now, we also looked at the stock market and we saw that it was rallying. At that moment, we have the stock market rallying and we’ve got the US Dollar at support. So, the JP Yen should weaken slightly.
So, we were looking at USD/JPY for long opportunities and what we actually looked for was the pullback entry.
What I did was place a fib on the high of the candle to the low of the candle, and with these big engulfing candles, typically, we see a pullback before we see the extension move – like this move here where we have this big bearish engulfing candle. If we had fibbed from low to high, we can see that the price comes into 38.2 fib, and we can see the extension of the move. So, that’s what I was looking to do here. I was looking for the price to come into the 38.2 and start the rally again.
Now, we’ve actually missed that move by about 9 pips. Unfortunately for us, it has not triggered our position. So, what I did was eye up the four-hour timeframe and watch how the price reacted to the previous structure highs because now we’ve already seen the market trend in those environments. We see this happen where the market starts forming higher highs, higher lows. We look to buy from these dips and buy from where the market has previously found some type of resistance before. So, we’re very much in the downtrend situation here. You can see that the market rallies, retest lows, rallies, retest lows, and so on and so forth. Now, we’ve broken out. I was expecting for the market to retest – just drop a little bit lower towards that 104 level again and then rally to the upside. Unfortunately, it hasn’t dropped back in the way that we expected but has retested the previous four-hour high.
So, what I did was look at the 15-minute timeframe for an entry. We can see here I’ve entered a new position recently. What I’d look for in the 15-minute timeframe is for it to go into an oversold condition and we can see that the 15-minute is actually trending against us at this moment in time. When I see that with the price at four-hour support, what I look for then is for the market to be in an oversold condition and then a breakout. We can see, here, that the market has broken out of this recent swing high. So I’ve entered the position here, it stops below the lows, and what I’m expecting is for the USD/JPY to continue to break to the upside.
So what I’m actually going to do is go to our previous order, and I’m just going to delete that now because that move could be gone, and I’m looking for the market to continue to break to the upside on USD/JPY. There’s potential pullback into the high before we see it move, but at the end of the day, the market has formed a new high on the 15-minute timeframe after finding support at the previous four-hour structure after going oversold.
We’re now looking for this market to extend up now and we can see from the daily timeframe that we have a little bit of room to go up into this next resistance point, which are these previous structural highs, around 105.50. This is the area that I’m looking at really or maybe 105.40, here. So, let’s see how the market reacts. Let’s see if we can get that push to the upside.
But it’s looking pretty good here for the extension up. I like the fact that the four-hours made new highs, pulled back, and retested previous structure highs and that the 15-minute has changed cycle.
So, we’re looking for USD/JPY longs. Look at this nice potential long opportunity in here, and I’ll speak to you soon.
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