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The Bounce Is Your Friend
By Eliseo Agas | July 27, 2007
Okay, so the subject isn’t as catchy as, “the trend is your friend” but it’s just as valid (more below).
With all the JPY crosses crumbling on daily charts like it was going out of style and the majors experiencing similarly strong moves, I hope you were all able to catch a piece of the action.
I would hope no one is making the mistake of fading these kinds of gigantic moves. I’m sure some traders may disagree with me on this and unless you’re extremely experienced I wouldn’t recommend it for the average person. With such broad sweeping moves this past week it becomes even more important to be patient and pick your spots carefully. On daily charts I’d prefer to wait for an actual retracement/bounce before considering getting into some of the pairs.
For example, it’s possible that there could be more downside follow through for USDJPY next week but, it’s best to wait for a bounce first and gauge how likely continued selling will be based on the extent of the bounce. Friday’s candlestick is fairly indecisive so if a bounce were to happen then this bar sets up the potential for it early next week. If and when the bounce happens we’d need to see it develop to figure out if it’s worth a shot to short again. By waiting for a healthy bounce we’d be able to get a better price while increasing the chances of catching a wave of selling pressure as bears attempt to retest the most recent lows and beyond.
It’ll be interesting to see how the markets shape up next week relative to this past week’s action. Buckle up, it could be a bumpy ride.
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