The weekly chart of the Top 40 shows a bit of potential topping coming into play as the stochastic is overbought and reversing. Also note that we're touching the top of the upper bollinger band and as highlighted by the red arrows in the graph, the last 2 instances that we saw the stochastic start reversing from overbought conditions having touched the upper band, this was followed by a pullback in the overall market.
On the daily charts we see little to give short-term guidance with the stochastic pretty much hovering in neutral territory. Friday's daily candle looked fairly bullish with a bounce off the previous flag pattern ceiling towards which price pulled back to over the course of the week. This would suggest a bullish start to the week is on the cards - especially when one also notes a potential bullish divergence with price painting a higher low and the stochastic putting in the lower low.
The daily support and resistance view of this graph also appears to support a case for an initial bullish move with a bounce off the 48,000 support level.
On balance this leaves us with a short-term bullish bullish outlook out of the blocks but we will start exercising caution given the longer time-frame perspective if price starts approaching the 49,000 level again. So quick profits will be taken on positions to the upside and if/when we start commencing the downside move, we will let our short trades run as far as possible especially if we breakdown below the 48,000 level
Not quite out of the blocks in a rush but the T40 came back from a long way down to paint a fairly bullish long-tailed daily candle and to end very slightly in the black. It appears as if the short-term bullishness noted above is getting ready to play out in the next day or two.
ReplyDeleteThe bullish move has materialised and the T40 is now moving back towards the high water mark.Despite the bullish daily stochastic and daily candles being painted until/unless the 49,000 level is comprehensively broken we're going to approach further long side trades cautiously here taking the quick profits if setups arise
ReplyDeleteAnd the bullish move followed through with a break and a close just above the 49,000 level. The stochastic is not overbought and is pointing solidly upwards as the bullish divergence noted above played out. With price closing at all time highs, it now becomes interesting to see if the zone around 49,000 can act as resistance and whether the long-anticipated reversal is on the cards. If price can consolidate above that level though we could see further upside into uncharted price levels. We may want to take off the breakout caps here and let things run if any setups are presented
ReplyDeleteThe index was unable to hold above the 49,000 level and reversed sharply downwards painting a highly bearish daily candle. The stochastic has now also stalled and there looks to be potential negative divergence in the making with the stochastic making a lower high while price makes a higher high. On balance there seems to be greater potential for further downside into the end of the week
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