Finger licking good! Take profit any time you want.  Open your favorite  beverage and burp away.

- Dave

Yen down to the 106.50   I don’t like the Yen but staying away from the Yen is like becoming a vegan on Monday…and then your wife makes ribs for Sunday dinner. 

Oh, well.

- Dave

The USD/JPY is on its way up to the last Winnipeg line — the 200% extension of the channel itself.  This would be a fine place to start looking for a short trade.  What I’d like to see is:

1.  A bearish candle formation, like an engulfing pattern or some such other thing;
2.  Stop goes above the 200% extension;
3.  Profit target 100 pips.

This pair is a thorn in my side frequently.  It did hit the top of the channel, and did print a reversal candle, and did produce a sell trade, and did stop out when it later broke and closed above the top of the channel.  The sell trade was at 109.95, and the candle that closed above the channel and stopped out the trade, closed at 110.33, so it was about a 40 pip loss.

The close above the top of the channel produced a buy trade.  The profit target is the first Winnipeg line outside the channel.

I was listening to the radio yesterday and I saw the band name pop up: Dropkick Murphys.  And that made me think of Dave Murphy, who has drop-kicked his fair share of awesome trades in his time, which is to say that he has done some great things — ask me sometime about his trading of the GBP/USD during Thanksgiving 2006.  Anyway, I wanted to name a sell trade in a descending channel the Dropkick Murphy trade. 

This is simply a trade that sells when a currency pair touches the top of a descending channel.  It’s even better if this candle is a reversal candle (this requires waiting for the candle to form).  The profit target is the bottom of the channel, but it’s a good idea to move the stop to break even when the pair hits the first fibble.  The stop loss goes 10-20 pips above the top of the channel.

Also, remember that we can trade a close above the top of the channel, but we’re not talking about that right now (much more of that kind of stuff below in the other entries).

Here’s the chart:

Welcome to Winnipeg!

In the pink shaded area, you can see the entry for a Winnipeg short trade on this pair.  The trade could now be closed (that’s my choice, anyway) because it has hit the last Winnipeg line outside my channel.

The USD/JPY formed a new channel and broke out of it — I missed the entry but I would be happy to sell the pair if it rises back up and re-touches the bottom of the channel.  That would be a Winnipeg trade. 

How far down the channel hole do you want to go?  I strongly encourage you to get in the habit of drawing winnipeg lines on the outside of your channel.  Here’s an update on our USD/JPY trade (that was already closed, see below), and you can see how the Winnipeg lines really help with profit targets.

It’s not my favorite currency pair but it did play along with our plan.  The pair easily made it down to the 150% extension (Winnipeg line) outside the channel.

The pair broke out and closed below our 4 hour channel.  I would not be suprised to see the pair rise back up and touch the bottom of the channel all over again, and that seems to me to be a nice place to sell the pair.  The stop can go right inside the channel (if a candle closes inside, I’m out).  The profit target would be the farthest Winnipeg line we can see on this chart — the 50% extension outside the channel.