As confidence creeps gently back into equity markets, bonds have seen traders reversing out of the flight to quality trade. Although we are now making lower lows and lower highs (Dow theory of a Bear trend) we are still in corrective mode with the longer term Bull trend intact. A sign that a much bigger reversal is underway would be a failure to hold the gap support at 116.055 created on the 28th of February. If this were breached we would then be targeting 113.235 or even 112.265.
Indicators in Play
When a market opens above the previous days range we say this has created a gap or window. If a market is truly healthy then this gap should hold as support, which is exactly what we saw back on the 5th of March.
Summary
Short term we are looking to sell strength with the expectation of taking a look at gap support 116.055. We would be looking to buy down at this support area but would be reversing to the short side again if this failed to hold.
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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