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:
As you can see, price has been chopping in a range for some time now. Sellers are becoming increasingly aggressive as they keep pressing on the lower bounds of this consolidation, threatening to violate the pivot lows. Not only are we looking at a pattern of lower highs and lower lows but support is being tested more and more frequently. These are classic characteristics of distribution.
Although when we look at momentum in the bottom pane of the chart, there is a bullish divergence in place as the 14 period RSI continues to make higher lows despite the lower lows in price.
So, this week’s question is simple:
Will sellers take control at this key level and confirm the topping pattern with a decisive breakdown?
Will buyers finally show up and defend the lower end of this range?
Let us know what YOU are doing: Buying, Selling, or Sitting It Out?
Tweet me at @Sstrazza or shoot me an email at email@example.com.
And, as always, check back in later to find out why this chart is relevant.