This is the UK Long Gilt chart, which has started trading after the long weekend very much on the back foot. Early on Friday things were looking very positive as we reached a new recent high at 112 16 and looked to be on our way to test our 22nd of January high at 112.44. Unfortunately by mid morning we had began to slide and although we recovered from the low at 111.51, we were left with a Spinning Top, which is a reversal signal. The short-term picture is very much favoring the Bears after gapping lower today. There is scope here for a look down at 110.66 or even 110.51. The only thing to prevent this happening would be a swift sustained move back through the gap resistance at 111.51.
Indicators in Play
Spinning Tops occur at the top or bottom of trends. They consist of a small real body and long shadows or wicks in either direction. The wicks represent the range and the body is where we opened and closed. This type of candle shows an evening out in the balance of power between the Bulls and Bears and is a reversal pattern.
Gaps occur when the market opens cleanly above or below the previous days range. In this scenario Thursdays low at 111.51 becomes resistance.
Summary
Shorter term we will be looking for selling opportunities to target the 110.51-66 area. We would probably wait to see if we try to close the gap before entering the market. We may not get the chance though but with the required stop above the gap resistance the risk reward by selling here is not quite enough..
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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