Trading with Trendlines : USD/JPY Today

Today I am following the USD/JPY pair.

On the thirty-minute time frame we can see that the pair is forming a flag.

To reiterate what the flag characteristics are:

-There is a strong resistance or support that is causing the consolidation.

-The figure is corrective, forming in a direction opposite of the main trend.

-After there is a breakout the trend continues, and so this is considered a trend-continuation figure.

-You need four points to draw it.

-The support and resistance trendlines are parallel or slightly converging.

-The flag is relatively smaller than the trend it is correcting.

The limit of the flag is its height at its base, in this case between low 1 (in red) and high 1 (in blue) in pip value. We have to project that height from the breakout level in the same direction as the trend.

It is imperative, however, to wait for a breakout and common sense dictates to place pending orders a few pips below the breakout level.

In this case the possible limit is 67 pips.