If you’ve ever wanted to see a perfect example of a pin bar, the one that AUDJPY formed today is it. Now that isn’t to say this is the perfect setup, but it is a perfect pin bar.
The pair has essentially been trading between 94.55 and 96.10 for some time now. And although the pair did break trend line support on May 15th, today’s bullish pin bar may give us a viable setup next week.
A pin bar with a long tail such as this is what we want to see but it does pose a problem. At current levels it’s roughly 150 pips to key resistance at 96.10. If we entered on a break of the nose of today’s pin bar that would give us a stop of nearly 90 pips. This is of course not favorable as we need at least a 1:2 risk to reward ratio.
This is when the 50% entry method becomes useful. A long entry on a pullback to the 94.30 area would provide us with a 50 pip stop and a 170 pip profit target, or a 3.4R trade.
Now for the downside to this setup – the recent break of trend line support. There’s no doubt about the fact that this is a sideways market at the moment. Ever since the trend line break on May 15th this pair has been moving sideways in a fairly tight range. Despite the trend line break, I do think today’s pin bar is a signal that we will see higher ground next week. The question is, how high?
Summary: Potential to look for a long entry on a 50% retrace of today’s pin bar. Do note the recent trend line break and range-bound market when managing your risk.
I mentioned GBPJPY yesterday, noting that the pair may be carving out a top and to look for a retrace to new resistance at 171.75. The market didn’t quite make it back that far today before losing more ground, however there is a chance that we’ll see a pullback next week.
Summary: Wait to see if the market can make it back to 171.75 next week. If it does, look for bearish price action as confirmation. The next key support doesn’t appear to come in until 169.70.
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