From the desk of Steve Strazza @Sstrazza

We want to be buying stocks that are in the strongest uptrends. One way we identify them is by looking at momentum which we use the 14-day RSI for. The strongest uptrends do not get oversold, or fall to RSI levels below 30. In fact, the strongest uptrends often stay above the 40-50 level and constantly print overbought readings above 70.

The S&P 500 registered an extreme oversold reading below 20 during the violent correction that began in late February. Here's a look.

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?

From the desk of Steve Strazza @Sstrazza

Thank you to everyone who responded to this week’s mystery chart.

We had mostly "do nothing" responses again this week but buyers or potential buyers came in close second, many of which said they were waiting for confirmation of the momentum divergence and failed breakdown before taking action.

We only had a few sellers, which is interesting because that's the camp we'd fall into as long as prices remain below support.

One of the main reasons for our bearish bias towards this chart is the fact that it's been in a long-term downtrend and consolidations tend to resolve themselves in the direction of the underlying trend.

From the desk of Steve Strazza @Sstrazza

In last week's Chart of the Week, we wrote about our bullish outlook on Gold and followed it up with a deep dive on the entire Precious Metals space, which included a number of trade ideas to express our thesis. This week, we have a table that helps provide a different perspective on its recent price action but arrives at the same bullish conclusion.

The shiny metal has gotten a lot of attention lately as it currently sits around its highest level in seven years.

After about a 9% surge off of this month's lows, we'd expect prices to consolidate in the near-term. But after that, we're betting on new all-time highs for Gold in the coming quarters as long as prices are above last year's highs near 1,560. Here's how we see it.

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?

From the desk of Steve Strazza @Sstrazza

Thank you to everyone who responded to this week’s mystery chart.

We had a lot of "do nothing" responses this week, many of which were caveated with the fact that the structural trend is lower, thus anticipating an eventual breakdown but waiting for more data to come in to confirm it first.

We also had a number of responses with conviction to buy the test of support and plenty of others who wanted to sell into it or "look to get short." The majority took a neutral approach, preferring to see how prices react at this key level of interest before choosing a directional bias.

I think that is the most prudent thing to do in this situation as well, so with that as our backdrop let’s take a look at this week’s chart.

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?

From the desk of Steve Strazza @Sstrazza

Thank you to everyone who responded to this week’s mystery chart.

There was a nice diversity of responses. Many said they were anticipating a break of the support line and would get short against that level while others were buyers as long as prices held above it. But the majority took a neutral approach, preferring to wait for the current range to resolve before having a directional bias.

A sound argument could be made for any of these answers in my opinion, so with that as our backdrop let’s take a look at this week’s chart.

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?