Strength in Yen

Despite the release of the BOJ minutes, which hinted at concern for slower growth in the Japanese economy, the Yen strengthened today on light volume on this second to last trading day of 2007.

One method I follow closely gave indications of a possible pause in the immediate trend lower. On the chart below we see a buy trigger in the way of a bullish divergent bar with angulation posted Thursday. A bull (or bear) divergent bar is the first of what Bill Williams, the author of Trading Chaos calls The 3 Wise Men signals which identify the potential beginning of a trend. The way to trade this trigger is by placing a buy stop for 1 contract just above yesterday’s high -- yesterday's bar being the signal bar.

Chart courtesy of eSignal

This signal is especially interesting to me because it meets the criteria of another methodology which I'm quite familiar with that utilizes trend-lines, a directional ratio, and identifies both trend and counter-trend triggers.

Under Bill's method -- see for more info -- the divergent bar signal, or the 1st Wiseman -- is a counter-trend trigger, and like all of his signals, is based on grounded assessments of price behavior. My Directional Ratio identifies this trade/trigger as counter-trend on the short-term daily chart, but a trend trade on the intermediate and long-term daily charts.

We'll have to see how this trade turns out, and for me it points out the advantage of having a methodology that provides black and white signals/triggers.

Should you ever have any questions about markets or methods give me a call.

Happy Friday, and a Happy New Year!

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