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 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:
As you can see in the chart, the current level has been a battleground for buyers and sellers for some time now. Buyers continue to test these former highs. And sellers continue to defend this critical area of resistance…
We can’t go sideways forever, so let’s break it down and analyze where things are likely headed from here.
The first thing that has our attention is this messy and prolonged consolidation pattern. Bulls are becoming increasingly aggressive as they keep pressing back to this overhead supply zone while making higher lows at the same time.
Seeing such frequent tests is typically bullish as more and more supply is absorbed each time. Although, without the context of the primary trend we lose a lot of information in the sense that we do not know whether we should anticipate an upside or downside resolution of the current holding pattern.
So we’re definitely going to need to zoom out on this one for the mystery chart reveal!
We also noticed momentum has been waning as the 14-period RSI has been declining steadily since it last hit overbought. With that said, it has recently broken its downward trend and RSI looks like it wants to switch back into a bullish regime as its currently at its highest reading since it first peaked out at this key level.
If momentum can print an overbought reading it would go a long way toward validating a potential breakout.
So, our question is simple:
Do buyers have what it takes to make a decisive upside resolution out of this holding pattern?
Or is there still enough supply at this level to act as resistance and keep a lid on prices at these key former highs?
And as always, we can sit on our hands and wait for more information too.
Are you buying, selling, or waiting?
Be sure to check back later 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 firstname.lastname@example.org.