USDJPY H&S alert

Just a heads up.
Right shoulder forming




RMc

This is risky as it's not at a natural resistance but is this pair's run finally coming to an end?



dl.dropbox.com/u/20815047/USDJPYdaily28_01_13.gif

It's exactly at the 161.8% Fib extension of the initial rise shown by the arrow. It's got a triple RSI divergence but that could easily break out. Perhaps it's best to wait for a lower high and then look for an hourly downtrend channel resistance to enter short, or simply wait until it gets to a support before going long.

Why oh why did I not let my long from 79.25 run?

Hi Jacko,

I reckon you're spot on with your analysis but I wouldn't be surprised if it went just a little further, maybe 91.5, before turning back to around at least 82.00 and possibly 80.50. It'll probably want 3 swings to get there though.
The triple divergence was due to the nested nature of the current advance. There is always a divergence in an impulsive move between waves 3 and 5 due to the very nature of the structure in that the fifth wave is struggling to make progress against the wise money getting out and taking profits.
Like you I asked myself the same question,'why oh why didn't I get in on the test of the initial wave 1 peak back on Nov 13th last???'

screencast.com/t/DGKW1I71o





Sorry Jacko, I should have said the reason I feel there is a little more upside here is the 15M chart shows wave (v) of 5 a little shy of the top of (iii). Time will tell huh?

Hi Diver and thanks,

In Spring 2011 I did a lot of research and backtesting on the correlation between RSI and waves. I mainly used the Dow but checked on a few other instruments too. I concluded that you cannot 100% rely of RSI divergences to call wave 5 tops but that they do occur quite often and I've been using this method ever since.

One thing we have to be careful of, however, is to know which degree waves we're dealing with and matching that with the right timeframe chart. For example if you're looking at the hourly chart and see a bearish RSI div between what looks like wave 3 and 5 on the same timeframe chart, the chances are you're actually still in subwaves of a larger degree wave up. I've been guilty of this a few times and sold thinking it was a top, only to see the price race on and then realise I'd sold at the top of a wave 3 instead of a wave 5 (the divergence came between subwaves 3 and 5 of wave 3). It's not the end of the world, but you could miss an extended wave 5.

Anyway, that's just how I think about it.

You say you asked yourself the question about why you didn't get in on the test of the wave 1 peak on 13th Nov. I did get in on that but failed to let the trade run, partly because of exactly that issue I talked about above. The other factor was that I only had a single position at that level so I could hedge my bets. This is where remo's 3 contract method is so clever. I'll try not to make these mistakes again.

ATB

One other thing, diver...

You reckon that it should have targets of 82.00 or possibly 80.50. I'd be interested to know where you get these from. Given that the price has reached the 161.8% extension of what looks to be a wave 1 up from 75.63 tp 84.178, sure we'd be due a wave 4 retrace which should not go below that 84.178 top?

Personally, if this trade works out, I'm targeting 85.74 which is the 38.2% retracement of the the last rise.