Mystery Chart (11-03-2020)

Steve Strazza
November 3, 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. We're looking at a steady long-term downtrend with price currently trading at fresh all-time lows.

Click on chart to enlarge view.

There really aren't many redeeming qualities about this chart... Here's what we're working with:

  1. A strong structural downtrend.
  2. Price chopping around in a bear flag just beneath key prior lows.
  3. Momentum in a bearish regime
  4. Momentum recently experienced two extreme oversold readings.

With that said, there is definitely a potential RSI divergence at the recent lows. It also appears as though downside momentum is waning as it failed to confirm the new record low with an oversold reading.

So, what is it going to be?

Does this bear flag resolve to the downside, and we're in for another leg lower?

Or, is this just a failed move? In this case, price likely whipsaws higher, breaks back above resistance at its key former lows, and confirms the potential divergence.

It's also always an option to sit on our hands and wait for more information to come in before choosing a directional bias.

What do 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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