Mystery Chart (09-01-2021)

September 1, 2021

From the desk of Steven Strazza @Sstrazza

Check out our latest Mystery Chart!

What we do here is take a chart that’s captured our attention, and remove the x and y-axes as well as any other labels that could help identify it.

This chart can be any security, in any asset class, on any timeframe. Sometimes, it’s an absolute price chart. Other times, it’s on a relative basis.

It might be a ratio, a custom index, or maybe the price is inverted. It could be all three!

The point is, when we aren’t able to recognize what’s in front of us, we put aside any biases we may have and scrutinize the price behavior objectively.

While you can try to guess the chart, the point is to make a decision…

So let us know what it is… Buy, Sell, or Do Nothing?

Here’s this week’s chart:

First and foremost, we're looking at a strong primary downtrend as sellers have steadily pushed prices lower for some time now.

Now they are threatening to knock this one beneath a critical level of support as we’re currently sitting on the lower bounds of its recent consolidation.

As we often say, we like to buy “smiley faces.” And this is definitely not that. In fact, it’s the exact opposite as we’d file this formation into the “frowny face” category.

But, it’s not all bad for this chart. One bullish characteristic is the fact that momentum has been unable to register an oversold reading at the recent lows. On the contrary, we saw RSI reach overbought conditions on one of its recent bounces, so technically we are in a bullish regime.

The lack of bearish momentum readings calls into question the aggressiveness of sellers at this critical level of support.

So, the question is simple:

Does this consolidation resolve lower, in the direction of its underlying trend?

Or do buyers dig in at these former lows and defend their territory once again?

Let us know what YOU are doing… Buying, Selling, or Waiting it out?

Tweet me at @Sstrazza or shoot me an email at strazza@allstarcharts.com.

And as always, check back in later to find out why this chart is relevant.

Allstarcharts Team