Now that we have studied the EUR/JPY pair for a two year period, it may be interesting to get a short-term look at a period of several months. The example starts where the daily, long term example finished, June 2006. That last page of our previous analysis quickly mentioned how June, July, and August featured more accumulation and price rise.

We will study these three months on 4 hour charts in order to see how the Chaikin Money Flow indicator works in a short term approach.

A trader should use short term analysis within a context of a longer time frame. Since we studied the movements of the EUR/JPY over the past two years using daily graphs it will help us to get clues on a 4 hourly time frame. The daily charts showed solid accumulation and a bias to buy Euros rather than sell the pair. That should be considered the “trading trend” so we should look for bullish signals and long the pair.

1. Start with June 13th and a new bottom: There is an onset of accumulation after a new bottom is created at 143.60. Chaiking Money Flow heads steadily upwards throughout the trading week. Price also, has a well behaved upwards trend. For the week, the Euro rises 200 pips against the Yen.
   1. CMF reaches +.10 at the end of the week, and price reaches 145.60. It is important to notice that the highest volume comes on a red candle, as some owners of long positions sell before the weekend.
   2. After the weekend investors are unwilling to accumulate more Euros and the pair switches to distribution.
      


2. During Monday and Tuesday the pair falls 120 pips. Selling pressure dries up near 144.40 as CMF reaches its zero line twice and turns back up. There is no sustained distribution as CMF delves into negative territory for only a brief time.
   
   1. At 144.80, CMF reaches +.10, an important level signaling accumulation. It is followed by further price gains. Since our overriding trading trend is to buy on the upside, the fact that the indicator reached +.10 is a good bullish signal. CMF can also act as confirmation to another indicator or to trendline violations; as accumulation continues it reinforces any buy decisions.
   2. After some retraction on Friday the 23rd, the pair continues heading upward on the following Monday.
      


3. After Monday, the current uptrend stalls and reverses. There seems to be a bout of profit taking during the middle of the week before accumulation resumes on Friday.
   
   1. On Tuesday, price barely moves higher even though CMF hovers at the +.25 level. The pair sets a peak at 146.60 and a level of resistance at 146.40. Tuesday's session ends on two red candles causing CMF to dip below +.25. Price and CMF continue falling on Wednesday until CMF reaches +.15 and price hits some support at 146. After a new low at 145.60, there is a breif rebound at the end of the session.
   2. On Thursday, CMF heads from +.25 to 0, capped by heavy selling at the end of the session. Distribution stalls there at the zeroline. A technical trader needs to examine carefully what happens next. If CMF bounces off the zero line and price heads in an upward direction, it is an indication that a correction may be complete and it is time to re-buy the pair. If price continues heading down then maybe there is a change of trend happening and it would be time to sell or take on short positions.
   3. Fridays session shows this struggle between bulls and bears, as the pair alternates between buying and selling. CMF does not fall below the zeroline and the session ends with investors buying back the Euro. They drive the price of the pair from Thursday's low to resistance at 146.40. If our technical trader realized a market bottom was forming, and predicted another bout of accumulation, he should take on long EUR/USD positions.

4. Rise: EUR/JPY's price advances, increasing CMF to above +.10. The accumulation that started on Friday continues throughout Monday, setting a new peak at 147. The pair has risen 170 pips from last Thursday's bottom to Monday's high. Tuesday opens with the pair drifting lower as CMF probes +.15.
   


5. Peak and Fall:
   1. In the beginning of Wendesday's session price climbs to a new high, 147.25, and CMF touches +.25.
   2. The next three candles show the pair retreating on high volume and CMF dropping sharply, to a measure below +.10.
   3. Price recovers to test resistance at the end of Wednesday, which registers as a smaller CMF peak, slightly above +.15.
      
   4. Resistance holds again on Thursday; CMF shows a third even smaller peak that is turned back at +.10. It is apparent that accumulation is waning here, as price is unable to break through 147.25. A bearish divergence between price and CMF is developing and serves as an early warning that smart money is shifting from accumulation to distribution.


6. Negative CMF:
   1. The next day, Friday, traders act on the bearish divergence. Price falls sharply, from 147.20 to 146, a drop of 120 pips in one session. CMF falls below the zero line into negative territory for the first time since June 20th.
   2. When trading resumes the following Sunday/Monday, CMF and price continue dropping. Selling pressure is more sustained than the previous bouts of profit taking. CMF stops falling after piercing -.15 and reaching -.20.
      
   3. In the second half of Mondays session, price starts heading up from 145. CMF also heads upward, but it turns back down when it reaches -.10. Tuesday shows price increasing, while CMF is turning down, a strange result. From looking at the graph, it probably has something to do with the gap in the price action.
   4. On Wendsday, price shoots up, and so does CMF. By the end of the session, CMF is back in positive territory signifying a change of trend back to accumulation.
   5. After some retraction on Thursday, Friday provides further gains for the Euro and accumulation of the pair. Price stops rising at 147.25. Resistance comes from the old Thursday high.