On September 2 2022 the EURJPY pair entered a confluence zone and signalled a high probability SELL trade setup.
Confluence trading is a combination of two or more trading strategies/techniques that come together and form a high probability buy/sell zone in a certain area in the market. Market patterns (Elliott Waves, Harmonic, Head and Shoulders, HH/HL and LL/LH sequences etc.), price action analysis (Support & Resistance, Supply & Demand Zones, Candlestick analysis etc.) and indicators (RSI, Moving Average, Stochastic etc.) are technical strategies/techniques used when trading a confluence setup. The charts below show a confluence trade setup that signals a trader on which side to take the trade.
SELL Trade Setup (Daily Chart)
1. Bearish Harmonic Pattern (Blue)
2. Supply Zone (Red)
3. RSI Bearish Divergence (Brown)
4. Price breaks bullish sequence and starts bearish sequence (Lower Low/Lower High Sequence)
EURJPY Daily Chart September 2 2022
Price is in a lower low lower high sequence, retraced higher and entered the supply zone/sell zone (red) on the daily chart. Bearish harmonic pattern (blue) also triggered sells at the XA 1.618 level which also terminated in the supply zone. RSI also was signalling a hidden divergence pattern (brown). These strategies all lining up together was a strong signal to start looking for selling opportunities. Shifting to a lower time frame (30 minute chart below) will allow a trader to refine a precise entry with tight stops.
EURJPY 30 Minute Chart September 2 2022
On the 30 minute chart price reacts lower from the daily supply zone/sell zone and breaks a bullish sequence (blue line). After the break lower price pullbacks higher and enters the 30 minute supply zone/sell zone (blue) and triggers SELLS. The RSI indicator breaking below the 50 level adds more confirmation the pair will continue moving lower. We are expecting the pair to push lower and hit the minimum 1:5 RR target and possibly even lower to the maximum 1:20 RR target. Only time will tell what the pair will do but for now we are bearish EURJPY.
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Of course, like any strategy/technique, there will be times when the strategy/technique fails so proper money/risk management should always be used on every trade. Hope you enjoyed this article and follow me on social media for updates and questions> @AidanFX
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