“INDICATOR OF THE DAY” - DOUBLE TOPS
Eur/Jpy looks to have found some resistance by 126.00 after failing by the level on two attempts over the past several days. Despite the recent short-term recovery rally, the overriding trend on the cross remains bearish, and as such, the latest topside failure ahead of 126.00 could now open the door for a potential double top on the daily chart.
Double tops occur after an extended up-trend when the market posts two consecutive peaks that are relatively equal, with a trough in between the two peaks. In the above example, the cross could indeed be in the process of forming a double top which will ultimately be confirmed on a break below the low point of the trough, more commonly referred to as the “Neckline.” When a double top is broken, traders can expect to see downside follow through amounting to the actual size of the double top from peak to trough. In this case the neckline comes in around 122.00 while the peak comes in by 126.00. Therefore, a break back below 122.00 could project a drop back towards 118.00. While it can be risky, sometimes it pays to anticipate these formations, as establishing positions in anticipation of the pattern formation can offer compelling risk/reward. However, we recommend no positions at the present time.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
If you wish to receive Joel’s reports in a more timely fashion, e-mail [email protected] and you will be added to the “distribution” list.
Joel Kruger publishes 6 daily pieces:
“Tech Talk” – A Daily Video Highlighting Technical Developments in the Overnight Session of Trade.
Monday-Friday (between 5:30am-6:30am EST)
“Morning Slices” – Morning Overview using Fundamental, Technical, Flow, and Quantitative Analysis (Includes “Trade of the Day”).
Monday-Friday (between 6:30am-7:30am EST)
“Indicator of the Day” – A Feature Report that Highlights our Most Significant Technical Indicator of the Day.
Monday-Friday (between 8:00am-9:00am EST)
“Cross Country” – A Midday Fundamental Update, along with Technical Analysis of Selected Cross Rates.
Monday-Friday (between 10:30am-11:30am EST)
“Scandi Daily” – A Specialized Daily Fundamental and Technical Overview of the Nordic Currencies. (This report is only distributed through email. Please contact [email protected] if you would like to be added to distribution.)
Monday-Friday (between 11:30am-12:30pm EST)
“Daily Classical” – A Daily Technical Overview of the Major Currencies.
Monday-Friday (published between 2:00pm-3:00pm EST)