USDJPY:Ascending triangle suggests a rise in price in a few days
I predict that a long trade would be most suitable in the next two days because of the formation of an ascending triangle pattern. This ascending triangle holds a resistance level at 124.560 which has only been tested a few times. As the resistance level does not hold such a high significance, it is more possible for the break-out of this pattern to result in an uptrend, rather than a downtrend. Since a downtrend is also a possibility, I have included this in the chart in case the market does show some promise for it. However, I take this to be an unlikely possibility because of the low strength of the resistance level, and the fact that this currency has so far been in a general uptrend since late July. Overall, although the trader must watch out for a downtrend, I predict that a long trade would be most suitable after the breakout of the ascending triangle.
As there are two possibilities (although one may be unlikely) it is a good idea to setup an entry trade for the respective uptrend or downtrend right after the break from the ascending triangle pattern.
(a) The breakout follows an uptrend:
The ascending triangle holds a height of 0.661 (0.53%), which means that the consequent uptrend (or downtrend) must also hold a similar height. Therefore, a Take Profit at 125.273 would be a suitable choice as that is the equivalent 0.661 height Also, the resistance level at 125.273 was tested on 12th August which gives it a much higher significance.
(b) The breakout follows a downtrend:
The downtrend will hold a height of 0.661, which means that a Take Profit at 123.82 would be suitable for this short trade as the uptrend would be at a similar height and right above the 123.79 support level.
In case a breakout does not occur until later, a stop loss could be setup right above the 124.462 resistance level for a short trade (option (b)) and right below the 124.462 resistance level for a long trade (option (a)).
Overall, for a long trade (option (a)):
Stop Loss: 124.382
Take Profit: 125.273
Risk/Reward Ratio: 16.54
As there are two possibilities (although one may be unlikely) it is a good idea to setup an entry trade for the respective uptrend or downtrend right after the break from the ascending triangle pattern.
(a) The breakout follows an uptrend:
The ascending triangle holds a height of 0.661 (0.53%), which means that the consequent uptrend (or downtrend) must also hold a similar height. Therefore, a Take Profit at 125.273 would be a suitable choice as that is the equivalent 0.661 height Also, the resistance level at 125.273 was tested on 12th August which gives it a much higher significance.
(b) The breakout follows a downtrend:
The downtrend will hold a height of 0.661, which means that a Take Profit at 123.82 would be suitable for this short trade as the uptrend would be at a similar height and right above the 123.79 support level.
In case a breakout does not occur until later, a stop loss could be setup right above the 124.462 resistance level for a short trade (option (b)) and right below the 124.462 resistance level for a long trade (option (a)).
Overall, for a long trade (option (a)):
Stop Loss: 124.382
Take Profit: 125.273
Risk/Reward Ratio: 16.54