SOMETHING TO LOOK FORWARD TO - Ok so Monday was a lesson in market psychology and discipline. Today must be the day where we get a trade set-up right? Well, I'm not so sure. We have had a very nice run since September, with volatility picking up in a big way. Now it seems the market is pausing to catch its breath before moving again. I still think there is plenty more action to come, and we are just going through a few quiet sessions before it all picks up again. It is critically important during this time to sit back on those hands and wait. Do not force anything because you are anxious to get involved. But let me at least wet your appetites a bit, so you have something to look forward to.
ONE - Two trades I am looking at right now are USDJPY and EURCHF. I have spent a lot of time talking about EURCHF and perhaps Monday's bearish price action could be setting the stage for that key break below the 2014 low from September at 1.2045. I believe a move below 1.2045 will put the SNB in a position where it is forced to act and this could open that major surge in EURCHF that everyone has been waiting for. So look for an opportunity to buy into an oversold EURCHF market on Tuesday (that is trading below 1.2045). If that happens, buy aggressively and then just sit back and hold that trade. You need to consider the possibility of a stop hunt below 1.2000, and so, make sure your stop-loss for this trade is somewhere below 1.1900.
TWO - USDJPY is another one I love and have not had a chance to get into. The current dip is a golden opportunity to establish a long position, and I wrote about this last Friday. Please see the report for an overview of the rationale behind the trade. If somehow we get another dip in this market below 106.00 that results in some oversold hourly studies, I will happily get involved and also look to hang onto to this one. I don't believe the market will go much lower than 105.00 and would recommend a stop-loss somewhere below 104.00. Clearly this is not a short-term recommendation and the wider stop-loss requires a position size with reduced leverage. But I would also be targeting a push back above 110.00. So to buy just under 106.00 with a stop-loss below 104.00 and a target beyond 110.00 offers a compelling risk/reward trade. Now we just have to see if these trades set up.