Scenario 1 – Bullish (Which I put most weight on)
Dow Theory says “Trend is in effect unless it is given a definite reversal signal”
Do we have a definite signal for reversal? Not yet.
But the fact is we have this continuation stair step pattern happening so I propose bullish run that could be happening this coming week.
What about the declining volume last several days? That is something I wouldn’t worry about because low volume is what you usually see in consolidation period (resting/waiting/continuation).
But if spike up with some good bullish candle tomorrow, we will see some good spike on volume as well.
I believe this week, we might see strong bullish candle and close above that 13300 pivot area. And we probably will test that old resistance as new support. And after testing it for a little while, probably continue bullish on to 13600 which next pivot. Also i think we are going to text that new support because of that uptrend channel line at the top. We probably hit that and come back down.
Moving averages are looking very bullish. 100SMA and 50EMA is crossing confirming another bullish momentum here. 10EMA acted as short term support last Friday (another bullish strength sentiment -short-term).
But another important pattern you see on this candle last four days are is this = We have been making higher highs! Yes very slowly and very insignificantly but for the fact that last Friday, bulls came back (leaving long bottom wick being supported by 10EMA) giving bullish sentiment in this short-term trade here.
So what about the overbought territories on the oscillators?
In the beginning of the trend, you most likely find the oscillator in the overbought territories just like last late December 2011.
Late December 2011 to April 2012, we had about 1000point bullish run and the whole time, STOCH & MACD were hanging out at OVERBOUGHT territories.
so if we decide to continue bullish from this day forth, that’s exactly we are going to see.
So this is what i think most likely happen in my opinion but I got two other possible scenarios.
Scenario 2 – Consolidation/Tight Channel
Here in scenario 2, we probably going to get to the 13300 area by slowly next week. After hitting that resistance of 13300, we probably come back down to test that 13000 area for support.
We might bounce back and forth between those two price points and possibly coming down to 12700 area and making bigger channel until it decides which way it wants to go.
Scenario 3 – Bearish
That long-term uptrend line is something to be noted of because it has been holding for last three years!
So we might come back down to test this uptrend line as a support.
Here we can zoom in and see that we could roll over and hit that uptrend line and fizzle around.
And if bearish strength/momentum is there, we can get down to 12200 area. I mean this could be months before happening.
I still think we have been building BULLISH MOMENTUM building up here in the INDEXES including S&P and NASDAQ so it will be interesting to see what’s going to happen in the coming weeks.
I do see more validity in the Scenario 1 looking at my technical analysis and other indicators. Only hang up I see is that pivot area 13300 so…
Hopefully you guys can implement this on your trade and let me know your thoughts.