Here’s my plan and thoughts for the USD/JPY pair. Lots of notes, so will put them here instead of on the chart.
The break from the triangle was expected for some time but the voracity was totally unexpected. Oft-times when a fast unexpected move occurs price will return to the break point. More so in forex than in equities it seems. I call this phenomenon “return to station”. As in a train returning to the station to pick up the stragglers or late passengers. This is akin to a gap fill and works on the same foundation. ALL ABOARD! After the train returns to the station and all the riders have boarded the train, the price will resume in its break direction, in this case, down. Price on the U/J pair has now returned to the station and has left again. The actual path is unknown to me but the destination is down.
I’ve been talking about 80.80 bottoming point since July(?) of ’10 and mentioned it at least in September ’10 along with enslinforex on the boards at the Dailyfx site, if not earlier. The triangle and break lower was brought up in early February, at least 4weeks ago, so this action is not unexpected. My USD bottoming count back in Oct was wrong in detail but may be right overall in the zone (http://www.tafool.com/Charts/usd1014104h.gif) from this post Elliott Wave Trading Discussion at Dailyfx back in October (charts have notes on them). The point is, I think this is and still believe it to be a bottoming zone. Given that, I have a bias which may end up burning me.
Now to pick the bottom. Confucius says, “He who pick bottom, end up with stinky finger”.
Price action from here out: I expect a return to the lows. A match of the lows (on a bar chart) or lower on a decrease in volume. The zone is 75.5 to 76.3. Watch the volume peter out and a divergence set up on a new or matching low to make the entry.
On the attached chart you can see my count would NEVER work on a bar chart but is fine on a line chart. I like line charts because they “cut the crap” or noise when wild or low liquidity whips occur. Given all of this, I’m looking for another long once the zone is reached.
Thumb (click to enlarge):