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Bullish sequence and trading strategy


In this blog we will look at the strong NZDJPY rally that took place this year, talk about the streak, what it means for the pair and also our trading strategy going forward. We will be looking at a run chart and also a chart showing the extreme zone from the April 20, 2022 peak and highlight the next extreme zone where we may see buyers entering the market to resume the rally or produce at least 3 waves higher reactions.

NZD/JPY bullish sequence from the low of January 28, 2022

The chart below shows that the NZDJPY has completed a cycle from the 03.2020 low to 10.2021 high. This rally took place in 5 waves since we can see a clear impulsive advance. This was followed by a 3 wave pullback which ended at the 28/01/2022 low. Then the pair resumed the rally and hit a new high above the 10.2021 high. The break above the 10.2021 peak created an incomplete bullish run and opened the extension higher. The streak is bullish from the 01/28/2022 low and as the declines hold above this level expect the buyers to remain in control and appear in the 3, 7 or 11 lows swings. Although above the 28/01/2022 low, the next target area remains 98.31 – 103.74.

NZD/JPY: Elliott Wave structure down from April 20, 2022 peak

The decline from the peak on 04.20.2022 takes place as a Zigzag Elliott wave pattern which is a 5-3-5 pattern. In this structure, wave A is in 5 waves, wave B is in 3 waves and wave C is also in 5 waves. Wave B could be any corrective structure. We can see a clear 5 wave decline from the 04/20/2022 high to the 04/26/2022 low which we have labeled as wave (A). This was followed by 3 waves bouncing back to the 04/28/2022 high and now the pair has broken below the 04/26/2022 low creating an incomplete short term bearish streak. As rallies fail below 04.05.2022 (84.82) and more importantly below 28.04.2022 (85.00), expect further declines towards 81.29 – 78.74 where buyers should emerge and resume the rally. rally for the next stage or produce at least 3 higher reaction waves. An alternative view is that the blue box bounce will fail 3 swings for another 3 swing extension lower to complete a double correction before rising again. Once the blue box reaction reaches the 50% Fibonacci retracement of the 2022-04-28 decline (85.41), blue box buyers should be able to remove risk from the trade and enter a risk-free position and buy then buy again lower at the next equal leg zone in the event of a larger double downside correction.