Last two days of slumps have tested support at 78.674 as bearish momentum is fading away.
We can observe at the same levels, a Dragonfly doji pattern at 7DMA was traced out in the recent past but with a stiff resistance at 79.547.
During convincing rallies of AUDJPY bears pulled back at 80.595 (strong resistance) on daily charts,
You can figure out from the monthly chart that the bears have managed to break supports at 79.547 levels, price remaining below EMAs consistently has been the evidence of the robust downtrend, to drop below 79.547 & EMA curves as the strong supply seen at this level for this pair.
However, leading oscillators on daily chart, has been indecisive to confirm the ongoing major downtrend but healthy convergence to declining trend on monthly plotting; we believe this as bears may resume again at any sensitive news.
RSI is currently trending at around 40.2804 that has hampered the momentum in rallies.
In addition to that, stochastic curves boiling up selling signals on monthly but there is no clear bearish crossover on daily.
Although bull rallies have begun today, but seeing weakness in broader picture to signify long term bear trend's momentum back again.
Trade tips: Credit Put Spreads (CPS)
Hence, using the above mentioned deceptive rallies, you decide to initiate a bull put spread at net credits.
Short 1W (-1%) in the money put with positive theta if you expect that AUDJPY would spike up moderately over the next near future but certainly not beyond your imagination, simultaneously, to favour major downtrend buy mid month at the money -0.49 delta put option.
Please be noted that the put we bought is at the money and the put we sold is in the money with an anticipation of AUDJPY could rise or remain unchanged within short expiry, and there onwards any fall would be taken care by longs in ATM put and your active longs in spot FX would be protected.
The leveraging effects can be added through this strategy in two ways, premiums on shorts wwith smaller tenors and every pip drop in major downtrend would result in positive cashflow in long position as they will have delta and theta advantage.
The material has been provided by InstaForex Company – www.instaforex.com