Thursday, March 28, 2013

J7 Trade / Week of Mar 24 to Mar 30

The Japanese Yen is staging a reversal after a long, steep downtrend. Recently, the yen hit MONTHLY demand most certainly causing it to bounce off this level. It is now making higher highs, higher lows on multiple timeframes, daily to intraday.

We want to get long on the swings.

The J7 (mini) or the 6J are beasts of a contract easily moving in a 100 basis point range per day and often more. Its important to find quality demand zones marked by extended range candles (ERC) that react violently from each level.  We want fresh levels, with strong entries, strong moves away, and short times at the pivot level. We want to buy/sell at these retests.

A trade that came up on the morning of March 28, 2013 is mapped out below:

Trade #1 - Long J7 of 6J contract

Grade the Trade - 2/2

Looking at the 30 or 60 min of the 6J contract (most liquid) we see point on the chart marked by a sharp violet move down and up.

If we look at the 15 min chart we see the COMPLETE structure of a DROP-BASE-RALLY. We want to be buyers at this level. This contract can move quickly the basing pattern is short and the expanded move away indicates there was large and unfilled demand.

The yen has had some nice swing moves this week and being a buyer near each of base of the large pivots has been profitable. This movement requires some careful trade planning and choice of areas. We are only looking for the highest quality zones.

In the second chart below, the 15 min time frame shows the structure of the demand zone. As the market is acting bullish, the entry to this trade needed to be one to two ticks above the candle body to gain entry. With this market, its possible to miss entries if we are too conservative.

This trade entered the contract at a limit price of 0.010601 (the bid-ask of the bottom tick!) and exited as price entered the lower end of the ranged marked at T1. There were several attempts at this price and it was the third attempt that finally traded into the zone.  Price did not go far into this level and once tested quickly reversed.

This tells us a couple of things: buy orders at this level quickly reversed price upwards once hit. This reversal was the result of institutional demand.

Most importantly, we got our low risk entry and managed to quickly move up the stop to break even or better allowing the trade to work.

T1 marks a supply area in a smaller time frame that is relatively high on the curve. Multiple contracts could left to run further with a stop at break even and pivot lows along the way.

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