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.
Click on the chart to enlarge view.
Today we’re looking at a long-term downtrend which is trying to regain its footing at key former lows.
Momentum has been stuck in a bearish range for some time but there is a long-term bullish divergence in place. We saw similar divergences form the last two times price was at this level, both of which resulted in significant price reversals.
The long-term moving average has also started to flatten and turn higher just as it did during prior bottoms at this level (see blue arrows).
Lastly, price just confirmed a short-term double-bottom pattern by breaking above its most recent high.
Despite all these positives we need to keep in mind that the more times a level is tested the more likely it is to break, and these former lows have already been tested more than a handful of times.
So, which is it…
Is the bottom in and we’re about to get a sustained trend reversal?
Or does this chart roll back over and give sellers another chance to take out these key lows?
Let us know what you think!
Tweet me @Sstrazza or email me at firstname.lastname@example.org and check back on Thursday to find out why this chart is relevant.If you enjoyed this post and want access to our premium research, start your 30-day risk-free trial or sign up for our “Free Chart of the Week” to receive more free research like this.