Mystery Chart (11-10-2020)

Steve Strazza
November 10, 2020

From the desk of Steve Strazza @Sstrazza

New Mystery Chart!

For those new to this 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. We're looking at a steady long-term downtrend with price currently trading just above fresh all-time lows.

Click on chart to enlarge view.

There aren't too many redeeming characteristics about this one. Buyers had successfully defended its prior lows several times and looked poised for a potential reversal with a higher high and overbought momentum reading, although sellers quickly regained control and pushed price below this support level, which has since acted as resistance.

Momentum also shifted back into a bearish regime on this breakdown.

With that said, it does have some positive characteristics that we look for to spot turning points. One is the long-standing potential momentum divergence, as RSI has been making higher lows despite the lower lows in price.

Another is the slight bear trap below the recent lows and quick move higher. Momentum is currently at its highest level since before price broke below support, but price is still a good distance away from confirming the divergence.

So, what do we want to do with this one?

Bet on a failed move and fast move higher?

Anticipate an eventual breakdown from the current consolidation, which would be in line with the underlying trend?

Or, wait for more information?

Tweet me your thoughts @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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