Intraday:
After an initial selloff on European worries which made the bear channel we formed on Friday break down, we began setting up a bearish rising wedge pattern. That pattern broke down late in the day and moved to form a bull channel. Right at the end of the day we ended up getting a bullish alignment of the moving averages. The patterns we formed today, on an intraday basis anyway, suggest that we are going to head higher.
Daily:
On the daily timeframe today’s price movement brought us to a low which tagged the bottom trend line of our bear flag pattern before reversing and spending the rest of the day slowly moving back up. We ended setting up a potential reversal pattern in the all too common hammer. For confirmation of this reversal pattern we will be looking for a closing price above today’s high as all reversal patterns require confirmation.
Our bear flag pattern continues to play out and we speculate that we will go higher. Considering that today we tagged the lower trend line of our bear flag pattern and appear to be forming a reversal pattern off of that. We could begin our final sub wave of my wave two before ultimately heading lower to break down out of this pattern.
With the above information under consideration we must also look to our indicators. Our indicators, at the moment, are still showing bearish signals. The ADX is still broadening, the stochastic is still pointing down, and the MACD histogram put in another downtick with the signal lines turning down. All this considered, I suggest being very careful as long as we remain in this bear flag pattern and would not make a play until we have a decisive break in one direction or another.
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