From the desk of Steven Strazza @Sstrazza and Grant Hawkridge @granthawkridge
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:
Today, we’re looking at a strong primary uptrend. Would be tough to argue otherwise, don’t you think?
We know buyers have been in control as price has been stair-stepping higher, resolving upward from one continuation pattern after another along the way. With that as our backdrop let’s see how things look today.
While momentum is still in a bullish regime, sellers have definitely become more aggressive of late. Momentum is waning and has been unable to achieve overbought conditions during the latest leg up as it diverges from the higher highs in price.
So what are we doing here? We’ll break all that down during the reveal post in a few days.
The real point of this exercise is to see what you are doing.
Are you making the bet that sellers win and break this current level of support? This would trigger the potential momentum divergence and failed breakout… opening up the door for a swift selloff.
On the other hand, we can side with the underlying trend and make the bet that there is enough demand at this level to act as support in which case price is likely to eventually resolve higher just as it has done in the past.
I gotta say though, the current continuation certainly has more of a frowny (“toppy”) vibe than a happy face one like those before it.
And remember, there are no called strikes in markets so we can always sit on our hands and wait for more information too.
Are you buying, selling, or waiting?
Be sure to check back later in the week to find out why this chart is relevant.
In the meantime, we want to know what you think about it!