Sunday 9 December 2012

Is NZDJPY finally ready to short?

So today is the day I’ve been waiting for...for quite some time! Regardless of the onset of the Santa Claus rally and that old temptress, NZDJPY has reared its head against a rather immense level of resistance, just shy of the 69.00 level. This level has remained intact for two years.

As the bounce is 70% more likely than the breakout, and the reward/risk profile infinitely more....well, infinite, it makes sense to short this bad boy before the such an opportunity – one we have been waiting for since March this year – is lost forever. 

We are blessed with a doji bar (reflecting indecision at the top which demonstrates to us that the balance of power between buyers and sellers in the market is tilting in favour of the bears. We also have divergence (for those of you who bother to look at such things)...and, the makings of a head and shoulders formation on the hourly timeframe. 

While I would prefer a high test at such a level, I shall place my order below Friday’s low, safe in the knowledge that I will only be filled if the neckline of the head and shoulders on the hourly is broken...and, thus, is confirmed as a reversal pattern perpetuating a move on the higher timeframes.

The reward to risk on this trade is epic, with a target at: 60.83 – giving it a reward/risk of: 16:1 risking 1%...or 32:2 (risking 2%)

 Above: NZDJPY (on the Daily)
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4 comments:

  1. erickj10 December 2012 at 17:28

    Hi Rob, Nice one!! Just wondering why have you taken the target at the 60.83 level? Is it a Fib thing?

    Regards

    Erick

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    Replies
    1. RobColville11 December 2012 at 14:00

      Hi there Erick - I wouldnt 50 fibb a doji, just a test bar with a reversal on a lower time frame.

      Hope this helps

      Rob

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  2. PiersC12 December 2012 at 04:14

    Hi Rob, nice post, thank you very much for that, I had been watching this level (as well as a similar formation on CAD/JPY, although we're some 70 pips away from the key Resistance level there as I type this). Given that with the benefit of hindsight NZD/JPY broke through this level, are you now watching the 69.73 (ish!) level, taken obviously from the high of October 2009? I am and wondered whether you'd look to short from there? Kind regards and great to have you back posting here! Piers

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  3. RobColville12 December 2012 at 05:56

    Sure, am watching this level with even more interest Piers! Its got to run out of steam at some point where the bulls realise their profits and cash out. So the stronger, more long term the level has been formed then the most likely it will be as a potential turning point.

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