The US Treasury notes are now causing great concerns here as we have broken the neckline support and have a complex Head and Shoulders in place. Unless the Bulls can act quickly and get us back above 114.10 we have a downside target somewhere around 110.00. If we do try to bounce the Bears will be out in force to keep this formation in play. Further confirmation that this long term play is under way would be a close below our 38.2 Fibonacci Retracement level at 112.61. This really would be the last chance saloon for the Bulls.
Indicators in Play
A Head and Shoulders pattern consists of four basic components. A left peak that forms this shoulder, a higher peak in the center that forms the head and a third lower peak that forms the right shoulder. Finally we draw a line between the two dips to form the neckline. A break of this neckline indicates lower prices but a break back through this point tells us that the formation has failed.
Summary
We are now very much with the Bears for the long term looking to sell into any strength. The only thing that would negate this play is a sustained move re establishing us back above 114.10. Our fist downside target is 110.04.
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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