16 Jul 2012

EURJPY Review: Another Double Top suggesting bear?

Posted in Forex Trading Price Action Technical Analysis By Dr Chan Chee Hoe On July 16, 2012

There was only one-way traffic for the EURJPY in July. Having failed to reach the high of June, price came tumbling down. Looking at how price behaved in March, would history repeat itself?

On the Daily chart, the neckline of the double top formed in June has been broken in July. In the past week, price had failed to retest the neckline. Bearing in mind that following the previous double top in May, price fell a further 997 pips, Tflow® students would certainly be looking for a repeat of this pattern. Along with the formation of the double top in June, price failed to break out of the purple downward equidistant channel. With price closing below the low of January (Pink horizontal line), will price embark on another journey down south?

A Repeat of the Double Top?

Going down to the H4 chart, we are able to add an intermediate trendline to the downward blue equidistant channel. In Week 28, price touched the lower border and intermediate trendline of this equidistant channel on multiple occasions. Thought price remains supported by the lower border of the blue channel, we cannot ignore the successive lower high and lower low that has emerged in the past two weeks. Nevertheless, price remained precariously on this trendline.

Series of lower-highs and lower-lows in the past 2 weeks

Going into Week 29, here is what we can look forward to:

a) Bulls (Blue arrow) will for a bear trap to closer above the low of January (Pink horizontal line) and retest the intermediate blue trendline. Thereafter, the lows of Weeks 26 and 24 will serve as possible levels of resistance.

b) Bears (Red arrow) will continue ride on the fears of the World and European economy to resume its move south. Once the low of Week 22 is broken, 88 may become a reality!

And the Doctor’s Advice for the Week: Patterns always repeat themselves, especially in the high timeframes. Respect the higher timeframe and follow the flow!