From the desk of Tom Bruni @BruniCharting
New Mystery Chart!
For those new to the exercise, we take a chart of interest and eliminate the x and y-axes and and all labels eliminated to minimize bias. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. It can even be inverted or a custom index.
The point here is to not guess what it is, but instead to think about what you would do right now. Buy, Sell, or Do Nothing?
This week’s chart to me looks like a failed bottoming pattern. Prices made a lower low, consolidated, and then broke out of a downtrend and its moving average. Since then we’ve been consolidating within this range, potentially forming the right shoulder of an “inverse head and shoulders” bottom or the handle of a “cup and handle pattern”.
Click on chart to enlarge view.
I prefer to focus on the psychology behind price action and not necessarily the name of a specific “pattern”, so regardless of what you call it the price action of late has been extremely constructive…until now.
We’re seeing this consolidation resolve to the downside, not the upside, which puts this bottoming pattern in jeopardy. If you’re an aggressive trader I think you can be short below this broken support level or at least take a neutral approach if you’re not since I don’t see any reason to be long.
This chart is one of the most important developments I’m seeing this week, so I’m curious what everyone’s thoughts are.
Tweet me @BruniCharting or email email@example.com and check back in Thursday to find out what this chart is and why it’s so relevant.