As we all know, the goal of trading is to make money. But sometimes traders think like analysts, and being right about a market's direction overshadows the primary directive -- making money. So when the stock market gives us fits and starts, and crosscurrents like emerging markets and the Federal Reserve make equities treacherous, it makes sense to look for other opportunities.#-ad_banner-#

As they say, there is always a bull market somewhere, and right now, it looks as if the Japanese yen is in the early stages of one. And for those who cannot or prefer not to trade spot currencies or futures, the CurrencyShares Japanese Yen Trust (NYSE: FXY) provides a liquid way to play.

I will leave the fundamentals of the Japanese economy to others to analyze. From a charting point of view, there is plenty to like, and given the yen's status as a safe-haven currency, the turmoil in emerging markets and volatility domestically add additional luster.

The analysis is rather simple. After a two-year bear market in which FXY fell from $130 to a low of $92.75 at the end of last year, technical indicators are looking up.

For example, on the weekly chart, the Relative Strength Index (RSI) made a higher low in December even as prices made a lower low. This divergence between indicator and price action is usually a signal that that a bottom is being put in place. In other words, supply is easing and the market is waiting for a spark to kick up demand. As we learned in economics class, low supply and rising demand pushes prices higher.

Let's bring this closer to home with shorter-term daily charts. Here, too, we see RSI rising before prices did. Trading over the past two months has left a base, or trading range, in place. We can even make the argument that it formed an inverted head-and-shoulders pattern, which does indeed suggest that a bottom has been made.

I caution that a two-month pattern is usually not enough to reverse a two-year trend, at least not without additional testing or pausing. But every journey has to start somewhere, and given that short-term resistance has been breached, the odds that there is more to come, at least in the short term, are good.

Assuming the pattern is an inverted head-and-shoulders, the neckline was pierced last week, not coincidently when the U.S. and emerging stock markets began to tumble. And while the 50-day moving average is more often associated with stocks than currencies, it too was broken to the upside at the same time.

A simple measuring technique of projecting the pattern height up from the breakout yields a target of roughly $97.50. That is where the 200-day moving average will likely be late next month, but more importantly, that is where there is resistance from the mid-2013 congestion zone.

If the FXY can break through that level, then there would be plenty of room before reaching the next resistance area. However, as mentioned, we cannot expect a bull market based on a two-month pattern, so expect some backing-and-filling if and when $97.50 is reached.

A 3% gain may seem small, but currencies do not move as fast as stocks, and for the current environment, that is a good thing. If the trade works, keep in mind that trends in currencies can persist for months, if not years. Slow and steady.

Action to Take -->

-- Buy FXY at the market price
-- Set stop-loss at $94.10
-- Set initial price target at $97.50 for a potential 3% gain in four weeks

This article originally appeared on ProfitableTrading.com:
Stocks Too Volatile For You? Buy This Instead

Related Articles
  1. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  2. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  3. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  4. Budgeting

    Plated Review, Is It Worth It?

    Take a closer look at the ready-to-cook meal service, Plated, and learn how the company can help you take the hassle out of home cooking.
  5. Investing News

    How China's Economy is Now Like America's

    China's economy could take the global economy down with it; why that might be good news in the grand scheme.
  6. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
  7. Chart Advisor

    These 3 ETFs Suggest Commodities Are Headed Lower (COMT,CCX,DBC)

    The charts of these three exchange traded funds suggest that commodities are stuck in a downtrend and it doesn't look like it will reverse any time soon.
  8. Trading Strategies

    4 ETFs To Trade the Russian Ruble (RSX, ERUS)

    Discover which exchange-traded funds (ETFs) provide investors with the greatest exposure to the Russian ruble and learn about the risks that come with each.
  9. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
  10. Products and Investments

    Are Dividend Stocks a Good Substitute for Bonds?

    Are dividend paying stocks a good substitute for bonds in a low interest rate environment?
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center