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Site Administrator | September 13, 2011

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September 13, 2011 - Understanding the 1-2-3 Top:

In today’s lesson, we are going to take a look at some interesting setups in the December Japanese Yen futures contract.  Japanese Yen futures trade on the CME and each contract represents 125,000 Yen.  Each tick is $12.50/per contract and a full point movement is equal to $1,250/contract.  The Yen, along with the Swiss Franc and US Dollar Index, is viewed as a worldwide currency safe haven in times of economic uncertainty and market volatility.

Although the September contract is still technically the “front month” contract, we will focus on the December contract as the September Yen expires on Monday, September 19th.   As you can clearly see from the chart, the Yen has been in a steady uptrend since July of 2010 rallying from a low of 11086 to a recent high of 13180 on August 19th 2011 – this represents a move of approximately of almost 2100 points or $26,250 per contract!  The current chart is showing a bit of a “topping” formation and from a seasonal perspective should trade lower starting in October.  Having a second confirmation such as seasonality and historical analysis on your side is always a good feeling, although like any analysis, is not 100% bulletproof.  Please keep in mind this is in no way a trade recommendation but simply an illustration of the 1-2-3 top pattern.  Click on Chart Below to Expand:

The formation that stands out most on the December Yen is the 1-2-3 top pattern.  The “1” point is the recent high of 13180 followed by the low of 12886 (“2”), and the retest of the high at 13105 is point (“3”).  This pattern suggests that historically, a break of the “2” low will send prices lower equal to or greater the distance between the “1” and “2” points, or 294 points (13180-12886) -  a move of 294 points is $3,675/per contract.  Conservative traders may wish to wait for a close below the #2 point while aggressive traders will trade the initial breakout below 12885.  The initial stop would be just above the #3 point or the #1 high for more aggressive traders.   One current risk to keep in mind is the fact that the yen can be a safe haven instrument which means if there is a signficant spike in fear, the yen could rally which is why it is important to always understand risk and always trade with a stop! Click on Chart below to expand:

Although this calculation projects a move down to the 12600 area, you may encounter resistance at the 12750 area which would be a retest of the current trendline.  If the trade does indeed meet the up trendline, it would be advisable to lower stop to breakeven or take profits.  If the trendline fails, you could possibly expect the price to resume downward to its 12600 target, followed by 12500 support, then down to the 12125 50% level.
Past performance is not indicative of future results.  Futures trading involves substantial financial risk. Please consult your personal financial advisor before using this information for your own trading purposes.

 

Cheers,

The TradingPub
"Trade, Talk, Learn - Cheers to Success"

Disclaimer: Article intended for traders and not English majors. Disregard any misplaced commas.



September 13, 2011 - Understanding the 1-2-3 Top:

In today’s lesson, we are going to take a look at some interesting setups in the December Japanese Yen futures contract.  Japanese Yen futures trade on the CME and each contract represents 125,000 Yen.  Each tick is $12.50/per contract and a full point movement is equal to $1,250/contract.  The Yen, along with the Swiss Franc and US Dollar Index, is viewed as a worldwide currency safe haven in times of economic uncertainty and market volatility.

Although the September contract is still technically the “front month” contract, we will focus on the December contract as the September Yen expires on Monday, September 19th.   As you can clearly see from the chart, the Yen has been in a steady uptrend since July of 2010 rallying from a low of 11086 to a recent high of 13180 on August 19th 2011 – this represents a move of approximately of almost 2100 points or $26,250 per contract!  The current chart is showing a bit of a “topping” formation and from a seasonal perspective should trade lower starting in October.  Having a second confirmation such as seasonality and historical analysis on your side is always a good feeling, although like any analysis, is not 100% bulletproof.  Please keep in mind this is in no way a trade recommendation but simply an illustration of the 1-2-3 top pattern.  Click on Chart Below to Expand:

 

The formation that stands out most on the December Yen is the 1-2-3 top pattern.  The “1” point is the recent high of 13180 followed by the low of 12886 (“2”), and the retest of the high at 13105 is point (“3”).  This pattern suggests that historically, a break of the “2” low will send prices lower equal to or greater the distance between the “1” and “2” points, or 294 points (13180-12886) -  a move of 294 points is $3,675/per contract.  Conservative traders may wish to wait for a close below the #2 point while aggressive traders will trade the initial breakout below 12885.  The initial stop would be just above the #3 point or the #1 high for more aggressive traders.   One current risk to keep in mind is the fact that the yen can be a safe haven instrument which means if there is a signficant spike in fear, the yen could rally which is why it is important to always understand risk and always trade with a stop! Click on Chart below to expand:

 

Although this calculation projects a move down to the 12600 area, you may encounter resistance at the 12750 area which would be a retest of the current trendline.  If the trade does indeed meet the up trendline, it would be advisable to lower stop to breakeven or take profits.  If the trendline fails, you could possibly expect the price to resume downward to its 12600 target, followed by 12500 support, then down to the 12125 50% level.

 
Past performance is not indicative of future results.  Futures trading involves substantial financial risk. Please consult your personal financial advisor before using this information for your own trading purposes.

 

Cheers,

The TradingPub
"Trade, Talk, Learn - Cheers to Success"

Disclaimer: Article intended for traders and not English majors. Disregard any misplaced commas.