" Turning Japanese I really think so"
This of course is a phrase from an old song and the theme today. I hope this chart is readable, if you click on it to enlarge it, everything should show up properly.
This is a current short trade I have been sitting on in the Yen with my trailing stop and profit exit displayed. This market has diverged from all the other foreign currencies who have been in space orbit recently. I will get hit on one of these two orders soon for a profit, it just remains to be seen which one. Hopefully the lower one.From a valuation and sentiment standpoint, this market is actually setup for a buy, but the shorter term technicals dictated a larger pullback first, so I was looking for a short entry.
You can see the significant divergence in the oscillator at the bottom of the screen as this market soared to it's recent highs. Timing is always another matter, but when I see this I begin to look for reasons the market will change direction. One popular pattern that is used is what is called a 1-2-3 high or low. This would be one of those although that is coincidence, it is actually a quite different pattern by things I have not displayed, but by chance it looks the same here.
Many years ago I tried the 1-2-3 pattern and found through losing money that it has no edge in the markets. However, the basic lower highs concept of it is sound. You just wind up trying to fade too many trends if you start by looking for 1-2-3 patterns. It should be the last component of an entry, not the first. Once you are setup for other reasons, it would then be ok to use that technique to use an an excuse to pull the trigger on something.