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:
First and foremost, we’re dealing with a primary downtrend here. But what is really striking about this chart is the potential reversal pattern developing as price currently tests the upper bounds of its recent range for the third time.
This really all boils down to one question: Will this key level of former support act as resistance yet again. There is a lot of price memory here, so regardless of which direction price resolves in, at least we have a clear level to define our risk.
Also, notice how momentum hit overbought conditions for the first time in a while. This is a classic characteristic of a trend reversal as it tells us buyers are becoming increasingly aggressive as they try and break through this key level.
We want to stay open-minded as the market continues to send us mixed signals as many key indexes continue to chop around at overhead supply, just like the chart above.
So what’s it going to be…
Do buyers have enough power to force a breakout above this resistance zone?
Or is there still too much supply that needs to be absorbed at this key level?
And as always, we can sit on our hands and wait for more information too.
So, 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!