Nikkei & USDJPY - December 11, 2014

No surprise, 18,000 was a strong resistance, and it rejected the Nikkei back to 17,000. The RSI has moved out of its overbought zone and volumes are low, indicating that this is a pullback that we have been waiting for.


You could assume that 17,000 is a good level to enter long (round number, former resistance). In this case you place your (small) trade with a stop loss below the previous low around 16,600. This is the risky strategy, because you are buying when volumes are low assuming that they will pick up. But you know your risk, and that's part of the fun.

Or you could assume that the Nikkei needs to pull back a bit more, especially since the October 31st gap hasn't been closed. What's more, the 200 moving average is far down below (15,400) and so is the ichimoku cloud. This is the prudent strategy: wait for a daily green candle to close above what looks like a low, with rising volumes and ADX pointing up.

USD/JPY

The pair hit 121.84 and was similarly rejected to 117.48. The pre-Lehman high was 124. The analysis is the exact same as for the Nikkei: trend is up, under huge resistance, pulling back now. If you open a 1h chart, the pair has broken an ascending trendline and looks like it has more room below before letting you buy. If you're afraid of missing a move you can always place a trade order back above the trendline at 120. But again, ADX is limp and I prefer buying a trend than an assumption.