Monday, March 10, 2008

USDJPY Divergence 3/10/08

This morning a classic divergence play was spotted at about 6:20 and triggered at 6:50 a.m. my time (PST).

Initial Risk = 9 pips
Initial Projected Target = 42 pips

Risk to Reward = 4.67
Net profit: +32 pips or 3.5R

At 6:20 our Moving Average oscillator indicated a divergence with a higher high, however price indicated a lower high. Using Fib's the FE 100% was identified as being the likely turn around area. This was triggered by the bar shown in the blue box indicating a potential setup. This setup was confirmed 2 bars later with a bearish engulfment candle. Entry was set to 1 pip below this candle at 102.25. Stop was the high of the confirmation candle at 102.34 for 9 pips. Initial projected Fib target was at 101.83 for 42 pips. This gave the trade a risk to reward ratio of 4.67.

After 8 candles the initial target was met. Since this move was part of the overall macro downtrend on the 30M bar (and above) we set our targets with the ATR 2.5 trailing stop.

Trailing stop is triggered at 101.93.

Net profit: +32 pips or 3.5R

No comments: