- Wednesday's candlestick (Apr 30) was a bear bar closing around the middle of its range 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 or if Wednesday's candlestick would close with a long tail below instead (if this is the case, it will indicate some profit-taking around the trading range low (3850 area)).
- The market did not break out below the April 22 low and the candlestick closed with a long tail below.
- The bears want a retest of the recent leg low (Apr 22) followed by a strong breakout and a measured move based on the height of the 5-month trading range.
- The bears must create strong follow-through selling to increase the odds of a successful breakout.
- If the market trades higher over the next several days, 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 the current move to form a higher low (vs Apr 22) and a double bottom (Apr 22).
- If the market trades below the April 22 low, 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 to show they are back in control.
- Traders expect at least 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.
- If the market trades higher, they will see the move's strength and whether it will form a lower high to April 25 high, forming a double top bear flag.
- For tomorrow (Friday, 2/5/25), traders will see if the bears can create a retest and breakout attempt 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
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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.