From the desk of Steven Strazza @Sstrazza
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:
The first thing that stands out on the chart is that after a period of consolidation, price action resolved to the upside from a big base. So, there is no doubt that we are looking at a primary uptrend.
The next characteristic that catches our eye is that after a big gain, price began to stall out just after reaching our objective at the 161.8% Fibonacci extension of the previous drawdown.
This is illustrated by momentum, measured by RSI-14, showing a bearish divergence at the recent price peak, and then confirming this divergence through price. But it didn’t end there… Price carried on lower and momentum followed, with RSI-14 recently falling into oversold conditions and shifting back into a bearish momentum regime for the first time in a while.
So this week our question is simple:
Will buyers have the power to push this back above our risk level, resulting in a bull-hook and continuance of the underlying uptrend?
Or is there too much supply at play at this level and we’re looking at the early stages of a valid breakdown?
And as always we can just 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!
Tweet me at @Sstrazza or shoot me an email at email@example.com.