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And the trade we’re going to look at today is the CADJPY. It’s an interesting pair because if you’re watching the stock market, which I encourage that you do, the stock market major indexes, when trading currencies, what you will see is when the stock market indexes are heading north, the CAD will do better than the JPY. So, it’s really quite an easy correlation, inter-market relationship, to get a grasp of this particular pair. And there are others. NZD, AUD, etc.
But this is the one we’re going to look at today. And I just want to focus your attention on what would’ve looked like a correction in here. So, you’ve got your level in there, where traders would’ve looked to trade some sort of ABC correction. Price drops, takes out that swing, pulls back, and starts to sell off to the 61 percent fib. Definitely looks like it’s selling off in there as well, and then boom, to new highs we go and the stock market is heading or making new highs as we speak.
So, there’s a lot of traders who took these trades believing that there was a bit of a correction taking place. And the reason that they believe that is obviously the strength of this sell off. That’s what’s going to convince them in to look to sell off that level. And then you get some very, very negative looking candles in here. This is really interesting. This would’ve looked as if it was heading down and then the candle itself reverses and traps those traders.
I call that an outside candle trap and now we’re off and breaking to new highs. So, if this pulls back, this looks like a really good place to take a trade.
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cheers Mark