Analysis for 09-08-11

Intraday:

                Today we started off relatively stable continuing the overall trend of the past three days.  We remained more or less flat following Europe’s lead once again.  We ended up breaking bearish rising wedge after bearish rising wedge forcing us to constantly redraw our lower trend lines (red trend lines).  As we approached Bernanke’s speech we appeared to find support at the upper boundary of the bull channel from three days ago.  Right as Bernanke began to speak we broke down out of the bearish rising wedge patterns and the upper boundary of Tuesday’s bull channel.  By the last hour of trading we moved all the way down to the lower trend line of the three day bull channel and ultimately broke through that as well.  The last 30 minutes of trading we back tested this line and immediately reversed off of it (the strongest trends don’t retest.  I have no info to support this but I hear it often from other analysts.).   

Daily:

                Today our indicators remain somewhat bullish despite the day’s sentiment over Bernanke’s speech.  The ADX is still in a bullish alignment, the MACD is trending sideways but remains bullish, and the stochastic looks as though it is turning bullish.  Even though we ended down for the day our indicators are moving into agreement but this can change if tomorrow’s price movement is also down.

If we look at just today’s price movement, we have formed a “spinning top” pattern (pretty self-explanatory).  This is typically a candle of indecision indicating an overall lack of direction.  By itself this pattern is more of a continuation pattern but does have the potential of reversal.

                We set up a potential reversal pattern in the form of a two day candle pattern called a bearish harami.  A harami forms when the day’s real body forms within the real body of the previous day (harami is Japanese for pregnant).  Directional connotation is usually on the second day’s price movement. Bullish is an up day after a down trend where bearish is a down day after an uptrend. 

From here we still have pretty much the same possibilities as we did yesterday (see yesterday’s post).  We could continue down and break our bear flag or we could move up a bit more before we reverse.  I am still thinking that we will see further upside to somewhere in between 1225-1240 considering that our indicators are showing bullish signals.