Last night, I pointed out the Value Area on the USDJPY. Let’s be clear on one of the Value Area concepts. If you open below or above the Value Area in a session, then if you break into the Value Area, you typically move across. On our charts, the Value Area is represented by two light blue lines. The top one is the Value Area High (VAH) and the bottom one is the Value Area Low (VAL). Last night, the USDJPY opened above the VAH line. So a pure Value Area play would be to short under VAH and expect the market to head toward VAL.
However, there are additional support and resistance tools that you can use to improve your entries and chance of success. In the case of today’s action, we had the Pivot (dark blue line) just under the VAH. The Pivot is almost ALWAYS a key level that the market doesn’t just break through. So, instead of looking to short under VAH, we let the market break the Pivot, and it gives us a higher percentage chance. Let’s see what it looked like:
So the USDJPY bounced off of the Pivot, just inside the Value Area, and A and B perfect, then broke many hours later in the US session at C. That’s the short you want to take. It went 40 pips down to the dark blue S1 level, although it didn’t quite make it to the VAL, but close enough, and definitely enough to make some money. Meanwhile, note that the dashed red line represents our Average Daily Range expectation boundary, and that stopped it also.
Either way, a profitable trade that behaved very technically.
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