YEN landslide creates an opportunity

The landslide in the YEN, seen here in the ETF  (FXY),  has created a picture.  RSI started to diverge off the lows as the prices pegged new gap down days to post lows on a daily bar for the past 2 weeks. This type of extreme bearish action, coupled with gaps, can create an opportunity for those traders that look for divergence action in technical indicators as compared to the price action in the stock or ETF.

I have traded long and short FXY but mostly long and was able to keep my head above water even in this nasty sell off. So as I watched the action with a magnifying glass the past 2 days, I see what I want to see. Positive divergence in the RSI indicator has show up. This gave me a clue to potential short-term lows for my long side trade. I got lucky the other day and bought FXY near the lows but based on this action, added some today as positive divergence shows it face. I’ll use this as swing trade to scale out towards 112-113.5 ranges.  My position is so small in these types of strategies that even lower lows probably wont shake me out too soon. If I’m wrong and it fails a new low, I’ll kick out 1/2 my trade and re-evaluate the RSI position.

The chart below shows the price bars matched to the RSI with price slopping down hard and RSI firming up the lower lows to create a slight up-slope.

FXY Day Chart by Lightspeed.

FXY Day Chart by Lightspeed.

Also, the USDJPY is showing some signs of a short-term top and can trigger some aggressive profit taking at any point the YEN is firming up.

Nick Pirraglia

http://www.TradersThinkTank.com

@Liquid_Trader

Disclaimer: The material provided is purely for educational purposes only. No information contained herein is a solicitation or offer to buy or sell any securities. The information provided is in no way investment advice from Nick Pirraglia, TradersThinkTank or any other contributed content. The opinions, analysis and commentary on this website are purely the subjective views of the author. Nick Pirraglia is not a Registered Investment Advisor and under no circumstances should any content from this site be used as investment advice, recommendations, or trading advice. Please consult your financial advisor prior to making investment decisions.

About Nickolas Pirraglia

Nick Pirraglia started his career in trading in 1991 after returning to the US as an Army Officer deployed in Iraq. He began as a bond broker and worked his way into trading. Expert mentoring, hard work and a disciplined approach to the markets has allowed Nick the ability to maintain a very successful career in Capital Markets and Trading for over 20 years as a professional OTC Market Maker and independent trader. Nick has also managed the trading desks for a two Dallas based capital management companies and traded equities for a Dallas based hedge fund. Nick has trained and mentored thousands of customers in the rigors of trading, technical analysis and risk controls. Recently, Nick had broadened his market experience through the design and product management of two automated trading platforms. He has the pleasure of working with some of the brightest minds in the trading community and has collaborated with experts in data, design, engineering and trading psychology. An avid long distance runner, Nick completed several marathon events, qualified for the Boston marathon, completed several long distance Triathlons to include finishing a full Ironman triathlon.
This entry was posted in Trader. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s