From the desk of Steve Strazza @sstrazza and Louis Sykes @haumicharts
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 of 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 it 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!
A bit down-trendy, wouldn’t you agree?
After relentlessly pounding on those former lows, sellers were finally able to push price through a key support zone which led to a swift downside move.
That brings us to today…
Despite price once again slicing through its recent pivot low like butter – this time instead of momentum confirming the move with an oversold reading, it’s diverging positively from price as illustrated by the higher lows in RSI-14 in the bottom pane.
With that said, momentum remains very much in a bearish regime and has barely been able to crack above 50 on rallies since breaking below those former lows.
Although, we could certainly argue that this trend may be overextended and due for some mean reversion higher… which could very well be propelled by the potential bullish momentum divergence and the possibility for a failed breakdown at current levels.
Do we have enough evidence to support taking this position?
Or, does the current evidence suggest this continuation pattern should simply resolve lower in the direction of the underlying trend?
The point of this exercise to see what you’re doing. So what’s it going to be?
Are you Buying, selling, or waiting for more information?
And as always, be sure to check back later in the week to find out why this chart is relevant.