Vacuum
ABBV Sell Vacuum - Understanding Climaxes and VacuumsABBV is selling off this week in a third leg down from the buy climax and all time high. Although it looks strong at first glance, this is more likely a sell vacuum (sell climax) than the start of a strong bear breakout. A vacuum is created when strong bulls step aside and wait for prices to reach a location they want to buy, and the strong bears continue to hold for the same price level (and some continue to sell). This creates a temporary one sided market. This sell off is likely a test the previous converging triangle, and middle of the trading range preceding the bull breakout. The bulls will look to form some sort of double bottom which could be a failed breakout below the 60 or 50 lows, or an actual double bottom. If there is a reversal up next week, it would form a parabolic wedge bull flag, bears will look to take profits and bulls will look to re-establish longs. If instead there is continued selling and a strong breakout below the 50 low, the bears will likely get a test of the opening tight trading range around 40.
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Vitamin Shoppe RalliesVSI has rallied quite a bit over the past few days. It has shown quite strong momentum and continues to test the upper bound of the Kovach Reversals Indicator . This plus the fact that it has almost doubled in value suggests that we should definitely wait for a retracement before considering taking a long position. Also, consider taking profits as a retracement is due.
Both the Kovach Chande and the Kovach OBV are very strongly bullish, wish also supports the fact that a retracement is near. Finally, present levels correspond with a very strong level which also overlaps with a Fibonacci level at $12.95. If we can break through this level, it should be able to cross the vacuum zone to $18.45.
If it is unable to break through current levels, it will have support at $11.05, also a Fibonacci level, and then at $8.60, which it seems less likely to test.
Dollar Bears BackAs predicted (see linked article), there was a brief respite in the USDJPY's tumble, marked by a morning star pattern, confirmed by a green triangle on the Kovach Reversals Indicator. Currently, we are in a vacuum zone and both Kovach Momentum Indicators are solidly bearish. Yields are lower, and there doesn't seem to be much on the horizon to lift the dollar weakness ahead of Non Farm payrolls next week, or a major breakthrough on the tax plan.
If you're interested in the Kovach Momentum Indicators or the Reversals Indicator, check them out here !
Crude at $40 invites buyers$40 is a significant price magnet that institutions obviously like to use as a bench mark. $40 Crude was sold in 1990, 2000, and 2003. It was bought in 2004 and 2009. I suspect that we will find buyers near 40 again. This may take a couple of months of sideways price action along 40.
Oil has penetrated the monthly trend line. Most trend line breakouts are not reversals and become with-trend entries. However, this in not a bull trend - it's a trading range. This is merely a bear leg in a TR, which is often bought near the lows. Price often gets vacuumed to the highs and lows of trading ranges, fooling many into believing it may breakout. However, most TR breakouts fail and reverse (in this case, up).
This is a sell climax, and two legs sideways to up are reliable. The first target is the EMA (20 bar). The next is a 50% retracement of the bear leg at around $70.
