It appears to be forming a bullish stair-step continuation pattern as it did 9/7 – 9/12 (#2) and it continued bullish.
However it could break bullish for a day or two and then, upon running into the resistance, it could roll back down to that uptrend channel support as it did on 8/20 – 9/05 (#1).
#2 = If we could close above 13,700, we are in for another bullish run
#1 = We do break out for a day or two, run into 13,640 resistance and roll back down to 13,340 uptrend channel support.
Here is the chart of the price action at the end of the day today.
First as you can see that we made lower highs. It means it failed to get back up to the previous swing high thus making lower highs. This suggests more bearishness in this picture and support that bulls were losing steam at this particular moment.
Also broke that support or neckline (if you want to call this a double top or even head and shoulder pattern) and when we did break the neckline, bears really took control.
*We might see some bearish day tomorrow looking at this price action.
Looking at moving averages and looking at the longer term, we are still in bullish trend. Very very strong bullish trend.
Trading above all moving averages and none of them are broken yet.
On the oscillators, we are seeing that $DJIA is scratching overbought territory so a continuation pattern or consolidation make sense and expected.
9/21 Friday – Bearish Sentiments
Well we’ve had some bright days last few weeks but I am starting to think that slowly dark clouds are starting to appear and bearish sentiment is starting to show.
$13,640 major pivot from early December 2007 and that’s where the bullish rally slowed down and we are forming this Stair-step continuation pattern. But I am not sure if we are going continue bullish. We might retrace back down to that long term uptrend channel support.
Last three days, we’ve tried so many times to break that pivot and has not been able to yet. During that process, we’ve threw two shooting-star reversal pattern. Looking at the candles sizes, nothing significant at this point but definitively a warning sign that bears are starting to roll out.
What I want you to notice today is the volume.
We have NOT seen this kind of bearish volume in 3 months while throwing a shooting star candle pattern today. I am not saying we are going to completely roll over on Monday but what I am saying is we are seeing little claws of bears coming out of their caves…
9/25 Tuesday – BEARS
Well finally bears showed up with some aggressive move today. Pretty decent size bearish candle there.
Next stop is at around $13,300 support (grey) which that also coincides with uptrend support line (blue).
And we must bounce up when we get to $13,300 otherwise if that uptrend channel is broken, we are looking at possibly longer bearish terms. But here is another supporting evidence that we are heading down to $13,300 area, MOVING AVERAGES! <– I absolutely love them because they can truly confirm your chart analysis.
You remember last time we had about 15 days of bearish run on late Aug? well it started with 10EMA getting broken. And when 10EMA was broken we came down to 50EMA and that’s where we bounced up. And I am proposing that is highly possible that it will play out the way it did.
However, if that 50EMA does not hold when it gets there? We are looking at around 12800 area.
9/30 Sunday – The Power of the Hammer
-I am NOT saying we are going to have HUGE bullish candle.
-I am saying we MIGHT.
10/3 Wednesday – Short-term(?) Trading Lanes
Well I have a question mark there because I am not sure how long we are going to be having these tight trading lanes.
It could be 2 weeks but the fact is this is a consolidation before it breaks out of that. So it’s not that market is being ‘funny’ but it is doing what it always does. Resting, reseting, consolidating. If you patiently wait for confirmation of the break and trade it in the way that it breaks. Simple but its hard task because it requires patience and determination.
Trading lanes, mostly what happens is that stock trades all around trading lanes just like how we change lanes often when we drive. So we could also make trading lane #3 in the support of $13,300.
These consolidation pattern is great because it gives you chance to get out of certain trades and wait for confirmation or you can set up quick retracement trades on certain stocks.