We will be using USD/JPY 4 hour chart. When drawing trend lines there are many different techniques . This technique is used to spot breakouts. Trend lines only assist in spotting these breakouts, there are other indications that are quite important to know that will help you figure out which direction the market will be going. When drawing a trend line you want to connect the wicks. In the picture you can see that I have touched a higher wick to a lower wick(skinnier line above the body). You need at least 2 wicks, but the more wicks you can connect the better. As the trend line continues it breaks through a body of a candle. In the diagram it is a green candle that is highlighted. Once this break out happens you need to wait for confirmation before you buy or sell. This confirmation is a retest. When a retest happens a candle wicks to the trend line and touches it. The graph shows that the very next candle is a very big bullish candle that also had a wick which touched the top of the trend line. When that candle closes, and does not pass through the trend line there is a high probability that you can make a buy entry.
Lets continue with our analysis by drawing a bottom trend line. This trend line shows 2 important things. The first thing is it shows a bullish trend, and secondly after the breakout the trend is so bullish that it is pulling away from the trend line. At this point it is recommend to draw new trend lines and reanalyze what is happening. From what I can see it is ranging which means it is going up and down, but it is also slightly going up with each peak. That is all I can tell from the current amount of information. My recommendation would be to buy at a bottom and close at a peak. If you don't want to risk it. The best thing to do is wait until more candle accumulate for another technical analysis.
Hope this helped out.
Yours truly,
ManBearBull
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