Jun 13, 2010

Weekly review / Седмичен преглед

Hello traders!
for several weeks I am saying that the indexes will build a base and then we will see a rally. It took a little bit longer - three weeks, but there we are - bullish signs on all charts.
Why? - the indexes are in support zone and in the same time the market breadth indicators have hit extremes and telling us to expect a relief rally (look at the last two charts). Of course it takes time the selling pressure to disappear and that is exactly what is happening the last three weeks - a base has been build.

Now the charts - all time frame are now bullish:
Weekly chart - several candles with long shadows at support level - buyers are stepping in. Last week candle is bullish engulfing. The histogram has ticked UP - momentum is shifting.
Daily chart - divergences on the MACD and the Histogram - momentum is shifting. The prices are bouncing from support.
Hourly chart - MACD multiple points of divergence and broken trend line.

I think we have a double bottom. It is still not confirmed, but I expect that to happen next week.
I think we will see A-B-C rally which will last three-four weeks and make a lower high - part of a topping pattern. Target for the double bottom is ~10900, but we have a resistance zone between ~10500 and ~10750 and I expect the rally to peak somewhere there. The resistance levels are also Fibonacci levels - ~10500 50% retracement and ~10750 61,8% retracement of the entire sell off.

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