Mystery Chart (08-04-2020)

Steve Strazza
August 4, 2020

From the desk of Steve Strazza @Sstrazza

New Mystery Chart!

For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!

We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.

You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?

Here’s this week’s chart.

Price is breaking out of a long-term base to fresh highs with momentum in a bullish regime.

Click on chart to enlarge view.

We often see potential bearish momentum divergences at new highs, but not here. Notice the new high in RSI that accompanied the most recent high in price. That's a signal of strength as buyers have been aggressively accumulating this asset at an increasingly bullish pace.

Like many fierce uptrends, this one was sparked by a failed breakdown. Price subsequently rallied right back to resistance at former highs, consolidated above them in a flag pattern, and then made another leg up to fresh highs.

This brings us to today... are we looking at another potential failed and fast move? If price doesn't hold above former highs, we could be in for a fast move lower this time.

Is that the bet we want to make? Or will our favorite Technical Analysis aphorism, "the bigger the base the higher in space" ring true for this chart?

We know what we'd be doing here, but we want to hear your thoughts!

Tweet me @Sstrazza or email strazza@allstarcharts.com and check back at the end of the week to find out why this chart is relevant.

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Allstarcharts Team

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