350 PIPS NZD JPY-- SHORT-TERM RALLY, LONG-TERM DOWNTREND

This pair has finally come to the end of a very strong Uptrend that began in June of 2012, reaching its peak in March of this year. As with most trend changes that are about to take place, the market goes through a period of Consolidation in the form of a Range or a Pennant before breaking out in the new direction. As these patterns are being formed, however, they can also provide setups to trade between Resistance and Support. Such an opportunity may be seen in the next few days if the 2nd Support price point is formed. Once a strong enough Bullish Candle signal appears to also break the current Downtrend Line, a rally of 350 Pips will be on offer for the sharp Swing Trader.

Looking at the figure below, we can see the current sideways movement of the pair that followed the end of the Uptrend. The Inner Uptrend Line was broken and is now hovering above the Outer Uptrend Line, indicating an imminent trend change bearish.


DAILY CHART















The chart below shows us more closely the Pennant pattern gradually being formed above this Outer Uptrend Line. The Resistance boundary has already been formed but with only one Support price point so far, a rally back to Resistance would be needed to complete the Pennant.


DAILY CHART















Such a rally would need to be started with a strong enough Bullish Candle to justify trading the mini-uptrend. This can be similar to the two previous U-turns at the 1st Support point and the 2nd Resistance point.


DAILY CHART















After this rally takes place, we could see another downtrend back to Support. If a major trend change bearish is actually going to take place for the NZD JPY, the Support boundary and the Outer Uptrend Line will be broken simultaneously.


DAILY CHART















This setup to start a new downtrend would be similar to the one that occurred in April of 2013. The Inner Uptrend Line at the time was broken along with a small Range setup.


DAILY CHART




The breakout continued until the Outer Uptrend Line was hit to then continue the overall Uptrend. The major difference between this scenario and the one currently taking place, however, is the size of the Consolidation. The larger the Consolidation being formed after a very long trend, the greater the chance of a trend change. If this is accompanied by a break of an Inner Trend Line, this probability increases even more.

While this trend change looks likely to take place later this year, profitable gains can be had in the short-run. If the setups and trends that are formed inside the Pennant are strong and clear, a few hundred pips can be added to your trading account over the next few weeks.




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Duane Shepherd 
(M.Sc. Economics, B.Sc. Management and Economics)
Currency Analyst/Trader
Contact: shepherdduane@gmail.com
Twitter: @WorldWide876
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