First Signals

1. First Buy Examined:
   1. The second week of April produces a clear “reaction” bottom. After almost touching -.25 CMF starts steadily increasing.
   2. A technical trader can see that the third week of April brings more accumulation. By the end of the week, an upward trend forms on the indicator. When CMF breaches the zero line during a large blue candle, a trader has an indication to buy somewhere between 128 and 128.50.
   3. During the fourth week of April, price action experiences ranging conditions, while CMF still continues to show bias towards accumulation. When CMF goes past +.10 for the first time it is a second buy signal, as we deduce that there is a new healthy uptrend. A trader should take a long position somewhere near the low of this range, at 129.50 or lower.


2. Further Accumulation: In May, the EUR/JPY rises from 130 to 137.5.
   1. Setting up a Sell: A trader should have his own risk management tactics devised to take profits when riding such a trend. The best tool that comes to mind is a trailing stop order, or even a manually adjusted stop. A trader holding long positions acquired for 128/129.5 needs to protect those winning positions. At the first sign of danger, our trader may close his winning positions.
   2. The Top: There are warning signs to heed before the top. First there are levels of resistance, from early in March, around 137 and 138.50. Second, accumulation has been on a steady climb from the -.25 to +.25 and the pair may be overbought.
   3. Resistance Holds: There are more traders willing to sell the pair at this high price than there are those willing to buy. Our trader may sell here too (137/136.50) to protect the profits he has already gained. A 50 pip trailing limit, from the top, would get one out at 137.


3. Distribution: The top is followed by distribution and Yen gains. As long as CMF continues falling our trader holds his short position(s).
   1. The CMF downtrend reaches -.10 as price reaches 131. At this point the indicator turns back up. Since CMF does not go past -.10, it can be said that distribution never reached a significantly heavy level. June’s downswing may have been a correction to the 1000 pip upswing of April/May. (It is in fact a 61.8% retraction of that upswing.)
   2. As the indicator turns up price keeps falling, a sign of divergence. There is buying pressure that price is not heeding. When the indicator reaches the zero line it is a good indication to buy, in order to protect another winning position. The indicator oscillates around the zero line which does not help a trader know which way the trend should go. However, once a firm market bottom is created at 130, an upward trend in both price and CMF appears with the start of July.
   3. At +.25, price stops climbing. The trader may be wary about losing the profits he has already gained as the situation here is similar to the last top, which also came as CMF reached +.25. He may therefore sell and take profits when accumulation falters. 

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