From the desk of Steve Strazza @Sstrazza
New Mystery Chart!
For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!
We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.
You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?
Here’s this week’s chart.
Click on chart to enlarge view.
In this week’s Mystery Chart we’re looking at a consolidation within the context of a long-term downtrend. This looks a lot like a bearish continuation pattern, or descending triangle, which recently resolved lower and is now retesting former support from beneath. Buyers were able to step in and defend this level several times recently as price has made a number of key lows here.
But with prices now trapped below these key prior lows, the question is this… Have sellers finally absorbed all the demand at this level in which case this breakdown holds and we should anticipate lower prices in the future? Or, do buyers dig in once again and prices snack back, turning the current move into a whipsaw or bear trap in which case we’d expect a fast counter trend move back towards the upper boundaries of the pattern?
While we’re definitely staying open-minded and watching the long-standing bullish momentum divergence and potential failed breakdown in play, we have to respect what price is telling us, which for now is that sellers remain in control below former support.
Tweet me your thoughts @Sstrazza or email me at email@example.com and check back on Thursday to find out why this chart is relevant.