At the end of February we broke trend support ending that particular attempted recovery. Friday’s poor session, spurred on by American banking jitters, saw us break the low spike from the 23rd of January. We then gapped lower yesterday taking us to a new low at 6174, which will need to be watched. Quick action taken by the banking system and the Fed saw a decent enough bounce on good volume ending the day with a Candle that just qualifies as a Hammer.
The Bears are still in the driving seat but there is a possibility of a bounce should we manage to breach Gap resistance at 6355.5. Trend resistance comes in at 6646.
Indicators in Play
When markets gap lower the previous days low becomes an important resistance. A breach of this line is good for the Bulls but a failure at this point sees the Bears gain in confidence.
A Hammer usually has a slightly bigger body than the one we have here, which borders on being a Doji or even a Star. Hammers are formed by a small body near the top of the days range and are called this as they are thought to be hammering out a bottom.
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Summary
We have been playing to the short side for some time here. We are approaching Trend Resistance at 1770.25. A breach of this would see us take some profit but shorter-term traders may wish to sell here with a tight stop.
David has been
analyzing and trading the worlds financial markets for the past 25 years. After an initial grounding with Mercury Asset Management and Warburg Securities he went on to set up his own brokerage operation in London. Since then he has appeared regularly on Bloomberg Television and been involved in providing analytics on behalf of some of the worlds major exchanges. He is also a member of the Society of Technical Analysts.
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