This counter has just executed a very bullish kumo breakout and all signs are pointing to the upside
Hope to hear any feedback regarding my analysis. Cheers.
To FF_Goal:
For the following reasons, I take issue with the word “very” in your first sentence; I believe that the trade may be premature.
Kumo breakout: This is encouraging, but it needs some confirmation; likewise the flip from downward to upward. Note that the kumo is relatively thin, which makes it’s depiction of support and resistance somewhat suspect. Incidentally, I would recommend that, at least for purposes of analysis, you use a demo platform that will automatically plot the kumo, for example, Alpari UK’s MetaTrader.
Tenken and Kijun: Likewise. These indications should be taken in the context of the waveform.
Waveform: The lengthy impulsive move upward was ended in mid-July by an overlapping wave—real-body bottom of wave did not exceed previous top. The subsequent wave downward looks more impulsive than corrective, being composed of non-overlapping waves. This counter-trend ended in mid-August with an overlapping wave. The final wave going upward also looks impulsive, although it has not proceeded far enough to make a non-overlapping wave. I don’t know what pair this is—not one of the ones I regularly trade—so I can’t check previous behavior or put up my own chart with arrows and comments. But in view of the long-term Daily trend upward, I would like to see Price exceed, on a closing basis, the previous high of about 1.25 before committing to a Long trade. The potential resistance at 1.25 seems to make for an inadequate reward/risk ratio, which I would like to see be above 2.0 at the least, and preferably 3.0.
Chikou Span: While the CS has crossed upward above Price, I feel it has not yet done so with enough angle and separation to be definitive. I may be biased, but I consider the position of the Chikou with respect to Price to be very important as a gauge of momentum, and one that, as Ian has recently pointed out, should be the final arbiter of an entry decision. I want to see the Chikou cross above a falling Price, which it is doing; I also want it to punch up as far above Price, at a good angle, as it was below Price when it started to rise. Note that this condition will occur about the time Price exceeds the previous LT high. Remember, what this graphical aid is showing us is that Price previously went down about a month ago and now it is punching up fairly sharply through its previous action, so the chances are that it has good momentum.
That point—that is, when Price exceeds the previous high—is where I would go Long. This is only my own rather conservative opinion; you might go Long now and be successful, as anything can happen, but in my opinion the probabilities do not yet justify such a bullish view.
Stop-loss: Placing the SL as close as the bottom of the thin kumo seems to invite a stop-out on a minor dip. And where else would you place it? This is essentially a kumo-breakout trade, and the Ichi Wiki would put the SL below the bottom. Triggering a SL if the Tenkan turns down seems risky for the same reaqson, as the TS is a short-term measure of momentum. If a Sen were to be used as a SL here, the Kijun would seem more appropriate, but that would entail a pretty big loss if it were hit. My comment above about insufficient risk/reward certainly seems significant if you place the stop-loss that far away. So you seem to be between a rock, etc., on the stop-loss.
I would want more assurance that Price will go up, and, if it does, by a good amount relative to the amount it could go down, before I would enter Long.
Bob
