The CHF / JPY has extended higher in a series of unaltered monthly bullish candles in a supply area, meaning anything long from here is a high risk trade and should be taken with a reduced risk.
Nonetheless, the stars are lined up for a test in the higher supply zone territory for traders too eager to wait for a more compelling short playbook.
The four hour swing trade setup is as follows:
As can be seen, the price has broken into a short term resistance zone, for which if it holds the price, it offers the opportunity to enter long from the bullish support structure on the anticipation of a lawsuit.
The RSI is bullish which supports the bullish view and the price is also above the 21 moving average.
Again, this is a higher risk trade as the price must correct on the higher time frames and enter a distribution area.
Therefore, a long entry should be taken with reduced risk, meaning that if the trader’s risk management rules typically only allow 0.5-2% risk, then the lower end of this scale would be appropriate. .
The stop loss placed as shown on the chart offers a 1: 2 risk to reward.
The stop loss can be moved to the breakeven point once the price breaks through the current resistance which would be new assumed support.
The following is a top down analysis of the pair from a monthly to daily perspective and offers the possibility of a downward swing trade.
Monthly chart: the price enters the supply zone
There is still room to go on this chart, hence 4HR’s long opportunity.
Monthly chart: bears looking for a pattern for a correction
The monthly period also shows that at current highs a confluence of 38.2% Fibonacci retracement provides a short opportunity for the distribution area.
There is also the prospect of a shorter term target slightly higher at 23.6% which also has a confluence of the earlier structure looking to the left.
A break out of this level could be an opportunity to add to the short position.
The weekly chart offers a convincing continuation on the upside as price is structural supported again before resistance likely rejects price.
The daily chart shows that the price has emerged from a new test of support which is also bullish in the short term.
This leads, again, to the 40 hour setup as explained above: