Trading Ranges with Candlestick Patterns

In the following daily USDJPY chart, we see the Ichimoku indicator accompanied by Candlestick Patterns. Prices have been consolidating sideways, as we see thin and twisting Kumo clouds. Such ranging markets are uncertain for Ichimoku traders, but with the help of Candlestick price action patterns, profits can still be found.

usdjpy g12 14.8.13

USDJPY Daily Chart from Bloomberg

We draw your attention to the Candlestick patterns:

Shaded green, Bullish Hammer (H): Lower shadow tends to be at least twice the length of the real body which should be at the top of candle. Bullish reversal when found in a downtrend.

Shaded red, Bearish Engulfing Line (EL): Second real body (open & close) engulfs prior session’s real body. Second candle must be black for bearish engulfing.

Note how the bullish Hammer signalled a bullish reversal in the middle of June 2013, and the bearish engulfing line triggering a bearish reversal in the middle of July. This is an example of how candlesticks price action can navigate Ichimoku analysis.

USDJPY prices seem uncertain at the moment, so trend followers will look for more clarity from the future Kumo clouds – whether they begin to slope up or down. With the Tenkan Sen (green line) below the Kijun Sen (red line), sentiment remains bearish.

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