Mystery Chart (05-05-2020)

Steve Strazza
May 5, 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.

Click on chart to enlarge view.

Today we're looking at a long-term base that recently resolved to new highs.

After a breakaway gap led to a runaway gap and vicious ensuing rally, price is digesting its recent gains in a constructive way, forming what looks to be a continuation pattern above former resistance at key prior highs.

Here are a few more things worth noting about the chart...

  • This is a BIG base. We all know what that means. If this breakout sticks, it should have plenty of legs and move much "higher in space."
  • There is a healthy series of higher highs and higher lows, illustrating a bullish bias to this long-term consolidation.
  • Momentum just hit a record high reading, confirming the new highs. This also speaks to the impressive velocity of the recent move.
  • Momentum has been in a bullish regime for an extended period of time.

While these are all positives, price is currently retesting its breakout level after quite a parabolic move. This area has been a battleground for buyers and sellers, and sellers have owned this level up until now, so we don't want to write them off just yet.

To me, this chart is likely headed in one of two directions, and we should find out soon.

Either this materializes into an epic failed breakout, similar to the last time price penetrated this resistance level, in which case it likely retraces a good amount of the recent move.

Or this fresh breakout holds and the current continuation pattern soon resolves higher, resulting in more higher highs in the future.

Which do you think it is? We want to hear your thoughts!

Tweet me @Sstrazza or email me at strazza@allstarcharts.com and check back on Thursday to find out why this chart is relevant.

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Allstarcharts Team

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