Playing Support and Resistance

Chart Pattern alerts are effective and easy to recognize, but what happens when the underlying market cycle doesn't agree? That is the case here. The 60 minute USD/JPY is in a distribution cycle as this asymmetrical triangle squeezes into the narrows of this chart pattern. The touch points for support are at 90.46 and 90.10. This is a definite soft support level with a variance of 36 pips.

It could be aggressively bought but the buy zone is very wide therefore carrying the inherent risk of the validity extending down to the 90.00 decade level. A breakout play through the downtrend resistance line is not advisable at this time. It won't be so until the market cycle flattens out to accumulation. As long as the market is in a distribution cycle the follow through will be unreliable. There is resistance at the 91.50 area which is just beyond the downtrend resistance line. It will be a low risk short entry again, as long as the 60 minute is in a distribution cycle. The trade off the 91.50 ceiling would be valid until 91.65.

Remember the levels are there as decision levels. What we do at these levels is dictated not by the chart pattern itself but by the market cycle that the chart pattern has developed within.

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