SGD/JPY Getting Tightly Wound and Prone to Sharp Price Moves

Cory Mitchell, CMT

The SGD/JPY currency pair is testing the top of a triangle for the third time. 

This currency pair is prone to sharp price moves, as exemplified by the price action leading into the triangle pattern.

There is room from the price to go higher or lower upon a breakout from the triangle (also see how to "front-run" chart patterns, such as triangles).

SGD/JPY Targets and Stop Losses

An upside breakout has an initial target near 81.50, and 82.50 over the longer-term which is near a former major resistance level around 83.

For a downside breakout of the triangle, there is an initial target near 78, with an additional target at 77. The bottom of a regression channel is near 77, and it's also just above a volatile bottoming pattern that occurred in August through September.

Place a stop loss just outside the opposite side of the pattern from the breakout. For example, if an upside breakout occurs, a stop loss goes just below the bottom of the triangle.

A stop loss can also be placed below a recent swing low if going long, or above a recent swing high if going short (can also use a 4-hour chart for finding a stop-loss location). This typically reduces the stop loss size of the trade as the stop loss can be placed inside the pattern instead of outside.

By Cory Mitchell, CMT. Join me on Twitter @corymitc.

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.

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