Mystery Chart (12-08-2020)

Steve Strazza
December 8, 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. As you can see, price has been stuck in a sideways range as buyers and sellers battle it out at a key resistance zone.

Click on chart to enlarge view.

As we like to say - the more times a level is tested, the more likely it is to break. And after a handful of tests at these former highs, price eventually did just that.

Although, the main caveat here is that the breakout didn't stick. Instead, we quickly reversed lower and confirmed the bearish momentum divergence at the high of the failed move.

Fast forward to the present and after a failed retest of this critical level from below, price is collapsing to new lows.

Pair that with the fact that momentum just hit its most oversold reading on record and the long-term moving average is beginning to turn downwards... This definitely has the makings of a classic topping formation.

So, is that it? Do we want to make the bet that price continues to plunge lower from here?

Or, should we be looking for some mean-reversion and an oversold bounce... maybe even one more shot at that resistance level?

Let us know what you think!

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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