The S&P just about made our high from the 27th of Feb reaching 1388.50 but leading up to this we witnessed a series of high wave candles. This is a worry and on this all sessions chart we can see that we are testing our trend support line. Another concern is that this two-time failure area coincides with the 38.2 Fibonacci Retracement of the move down from October last year. Unless the Bulls act quickly we are likely to head lower once again with 1309.50, our low from the 31st of March, as the level we must hold or pay the price.
Indicators in Play
High Wave Candles are formed when the market sees an open and close relatively close together. When we have a series of these it tells us that the battle between the Bulls and Bears is in the balance and usually sees the market reverse. In this case we have seen a fairly good bounce from the recent lows with the Bulls maintaining the upper hand. Now however, we are in danger of slipping back again.
Summary
We are sitting on the sell button at the moment with a close below yesterdays low at 1351.50 convincing us to go with this play. Should this happen we would be looking for a test of the 31st of March low at 1309.50. A recovery from current levels for the close today would see us shy away from this play for the moment.
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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