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 the price behavior 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:
There’s no shortage of mixed signals and messy conditions out there right now. And the above chart is a great example of just that.
So what are we dealing with here?
After a clean breakout from a large basing formation, price immediately pulled back to retest its former highs. But buyers successfully defended this former resistance zone which has now become support.
One negative development to note is that as price consolidates just above this key level, momentum is starting to wane significantly with a potential bearish divergence in the daily RSI.
With that said, momentum remains in a bullish regime and did hit overbought to confirm the breakout.
It’s very possible that price is simply digesting its recent gains as it churns above this key area of interest. This would be healthy and normal behavior.
So what’s the move here?
Did we just get a successful retest of the breakout level and now we’re ready for another leg higher?
Or, are we looking at a failed breakout in the making in which case price falls back into its former range and confirms the bearish momentum divergence.
Let us know what YOU are doing… Buying, Selling, or Waiting it out?
And as always, check back in a few days to find out why this chart is relevant.