- Friday's candlestick (May 2) was an outside bear bar closing in its lower half with a long tail below.
- In our previous report, we said traders would see if the bears could create a retest and breakout attempt below the April 22 low and if there is a breakout, traders would see if there are strong follow-through selling. Or would the market form a pullback towards the 20-day EMA over the next few days instead?
- The market opened higher but reversed to break below the April 22 low. However, the market reversed off the low, closing above the April 22 low.
- The bears want a a strong breakout below the April 22 low followed by a measured move based on the height of the 5-month trading range which would take the market to the 3200 area. The long tail below Friday's candlestick indicates the breakout is not yet as strong as the bears hope to be.
- The bears must create a strong breakout with follow-through selling to increase the odds of a successful breakout.
- If the market trades higher, they want the 20-day EMA to act as resistance and form a double top bear flag with the April 25 high.
- The bulls want a reversal from a double bottom (Apr 22). They want a failed breakout and a reversal from a lower low major trend reversal.
- As strong as the current selling is, the bulls see it as a sell vacuum and a bear leg within the trading range.
- They hope the bottom of the trading range will act as support.
- They must create strong bull bars trading far above the 20-day EMA to show they are back in control.
- Traders expect a small sideways to down leg to retest the April 22 low. They got what they wanted.
- Next, traders want to see if the bears could create a breakout below the April 22 low with sustained follow-through selling.
- Or will the market form a pullback towards the 20-day EMA instead? If this is the case, traders will see the move's strength. Will it be strong and close far above the 20-day EMA? Or will the market stall at the 20-day EMA again, forming a double top bear flag?
- For tomorrow (Monday, 5/5/25), traders will see if the bears can create more follow-through selling breaking below the April 22 low. If there is a breakout, traders will see if there are strong follow-through selling.
- Or will the market form a pullback towards the 20-day EMA over the next few days instead?
- The market remains in a large trading range (4500 - 3850). Traders may Buy Low and Sell High within the trading range.
- That means buying in the lower third of the trading range, and selling in the upper third until there is a strong breakout from either direction with follow-through buying/selling.
- Breakout from trading ranges can fail and odds slightly favor the trading range to continue.
Andrew
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.