The Breakout area where to place your buy or sell orders
Market dropped into lower floating zone, tested resistance multiple times but couldn't break through. Looking for short opportunity on London open - waiting for break below support, then retest before entry. Safer than jumping on initial break
EUR/JPY Trading Analysis - Morning Session
Opening Analysis
Good morning. I just turned on the charts and thought I would make a quick video about what I saw. The first thing that drew my attention - and that's how I quickly analyze what I want to focus on - was the EUR/JPY.
Key Observation: EUR/JPY Setup
The reason this drew my attention was that it came out of an area up here, dropped down into the lower floating zone. At the start of the Asian session, I put my dashed line through here. You can see how the market has actually come back up on this 30-minute chart, touched off of here, and came off. Then exactly the same thing happened again.
Lower Time Frame Analysis
At this stage, I want to look at the lower time frame. On the EUR/JPY, you can see that my line has been brought forward through here. You can see exactly the same reaction - the market came up to here, came back down again, pushed up again, but couldn't make it through again.
Addressing Congestion Clearing
This is a point where I'm often asked about clearing the congestion, so I focused on this chart this morning to explain this concept.
Looking at this area where I'm focused, if you look at this lower point and this point here, that creates a range under the line - so we're looking at weakness. What I want to do is look for a short trade at this moment.
5-Minute Chart Setup
Opening up the 5-minute chart, you can see the line is carried through exactly the same. We can see this occurrence at this point, and again we can see the occurrence there. We're now just opening into the London session.
Trade Setup Strategy
What I want to see - I've got a mark here - is the market break out from this area that's been defined. Currently, I'd be looking for a sell around here.
Important distinction: What I'd like to see is not simply a break of this level, because that could be a probe testing whether this area is going to hold.
Preferred approach: If it breaks down below this level, wait for a retest to occur, then put a sell order under this point. That is a far safer trade because we can see that it's tested that low, moved away from it, and then actually collapses and goes through it. This will then likely stay in the lower lane of the floating zone.
Summary
That's it in a nutshell - that's what we're looking for and how I would use that setup. This is how I look at the market in terms of breaking out of defined areas. Overall, I have a sense of weakness at this stage because we are under this line.
Hope that helps, and I'll catch up with you very soon. Take care.