From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
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:
Let’s break it down…
First and foremost, since its recent peak, price has printed a pattern of lower highs and lower lows… In other words, this one’s in a downtrend for sure.
Second, we’re in a bearish momentum regime as the daily RSI-14 hasn’t been able to hit overbought conditions in quite some time.
Seeing an oversold reading in the coming days would be strong confirmation of the new lows in price.
After completing a topping pattern, price is trying to carve out a bottom at current levels as it’s found support here at the 61.8% retracement twice already.
We saw similar behavior not long ago as price tried to find support at the 38.2% retracement. In fact, it successfully defended this level several times before sellers eventually took control and punched price lower.
Things look pretty much the same today as the current consolidation appears to be breaking down, in the direction of the underlying trend.
However, there’s a lot of price memory at current levels (and slightly below) as this zone has acted as a key level of interest for a long time now.
So, is this it? We’re going lower?
Or, does the bullish momentum divergence spark a failed breakdown… Maybe, similar to the one we saw at this very same level that preceded the rally to record highs?
What’s it going to be?
Are you buying, selling, or waiting for more information?
Tweet me at @Sstrazza or shoot me an email at firstname.lastname@example.org and let us know what you think!
And as always, be sure to check back later in the week to find out why this chart is relevant.