Combining Renko and Candlestick charts

Renko charts are great in terms of understanding what price is doing minus all the price spikes or wicks we get to see in Candlestick charts. However, a confluence between Renko and Candlestick charts can be a great way to gain confidence in a trade.

In this article, I present the USDJPY trade idea which combines renko and candlestick charting. Readers might know about a bearish call made on USDJPY here. Nothing has been changed on the analysis.

USDJPY - Renko Charts - Bearish Flag

To summarize:

• A major triangle was formed, which gives a target to the upside breakout at 106.864
• Price rallied 3/4ths only to reverse and start making lower highs (figuratively) and higher lows, indicating consolidation taking place
• During the process a bearish flag was formed, where the high of the flag managed to kiss 61.8% of the most recent leg to the downside.
• The bearish flag gives a target to 98.303
• I suspect a retracement to 38.2% at 102.657 before price drops lower.

Now switching to the candlestick charts and measuring the previous leg up with Fibs gives us the respective fib levels.

USDJPY - Candlestick Charts

• On the candlestick charts, we notice a triangle pattern set in place
• When measuring the previous leg up, we see a retracement to 50%
• We also notice what seems like a head and shoulders pattern being formed. If this holds, it gives us a downside target to 99.108

What to look for:

• Price shouldn't head to 102.657 and should reverse and move into the median line.
• In such an event, we can short USDJPY at 101.635 with stops at 102.657
• Trades could be moved to break even at 100.965 and book partial profits at 100.23 and 99.1 and finally 98.3 with stops moved to 100.23 to make the third trade risk free.