Wow, it has been a volatile session!  As I said in the morning Watch List, there were a lot of fundamental factors for the markets to trade off of today-the RBA rate hike, the Dollar pricing of crude, and NY Fed President Dudley’s comments.  Interestingly, a number of markets had breakout setups yesterday, ahead of today’s moves (I’ve often said I think that fundamentals are something people use to explain moves after they happen, not to actually trade off)

A number of currencies had breakout setups today; the Yen futures were one of them.  Let’s take a look at how it traded today.

Below is a daily chart of December Yen futures.  We had a breakout setup last Friday; Thursday’s bar was an inside and narrow range day, it was also a doji.  Friday (the middle blue arrow points to it) was the day of the US NFP report; there was a big rally intraday, but it fell back to close unchanged, ending in another doji.

Yesterday was another breakout setup.  It was a doji (the third consecutive day); it was also another narrow range day.  In the bigger picture, I drew trend lines for the past week’s activity, showing the rough triangle forming.  I also drew the Fibonacci retracement levels for the selloff from 9/28 to 9/30, so I had ideas as to where retracement resistance was.

3 straight dojis

3 straight dojis

The chart below is a 10 minute chart for today.  I drew lines at the breakout points I was watching-yesterday’s high of 1.1191, then the 50% retracement level at 1.1203, finally the first resistance from Trade or Fade (my breakout trading advisory). Any of these points could have been used for breakout buy points.

Lots of entry points

Lots of entry points

I thought I’d show three entry points today as not all were realistically viable as entries. Yesterday’s low, especially, was taken out last night at 7:10 PM Central Time.  If you were trading at that time, it would have been a good entry.  I was watching the Vikings-Packers game instead.

The Fib retracement level at 1.1203 was a little better; it was taken out at 7:30 PM last night, then the market came back under it around 1:50 AM this morning, then regained it shortly after.

Part of the reason I wanted to use this example was the “second pass” entry.  On a breakout day, there are times when a market will trade through a breakout point, then come back through it. A “second pass” occurs when it trades through the breakout point a second time.

I’ve found that the second pass through an entry point often results in a good trade, many times better than the first time through.  I’d suspect that on the second pass through traders have more conviction about the breakout move.  Regardless, “second pass” entries can give you a chance to get in to a market if you miss your first chance.

Getting back to the chart, the two lower entry points traded last night; they wouldn’t have done you any good this morning.  However, the first Trade or Fade resistance at 1.1232 worked well this morning.  When I got up this morning, the Yen was trading over that price; they dipped back below it at 7:30 this morning, giving an entry at 7:50 AM.

From this entry point there were a number of points to use as rally objectives. The first overnight high (and first profit target) was overnight high at 1.1259.  The first point on the daily chart was the top line of the triangle on the daily chart; that is at 1.1266 today.  The next spot was 1.1290 (the first Trade or Fade objective) and 1.1291 (Friday’s high).  As it was unable to take out Friday’s high I would be content to take profits and look for another trade.

For more information on trading breakouts in futures, check out my Breakout Futures Trading Method book here.

The information contained here includes information from sources believed to be reliable and accurate, but no guarantee is made as to accuracy, nor do they purport to be complete. Opinions are subject to change without notice. Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.

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