This daily chart shows us the real work that needs to be done on the larger time frame. As a reminder, we have two large patterns covering the past four months of price action -- 1) the triangle in red, which if valid then shows we fell bearishly through the bottom but a reversal and subsequent breach of the descending red resistance line would validate a throwback and invalidate that bearish break; 2) the descending wedge with the descending red resistance line at the top and the descending black support line at the bottom (based on candle bodies). A bounce off the bottom of the latter, as we are currently attempting, should see price targeting the same red descending resistance line with a breach of it seen as a very bullish signal. Within both of these, we are also reminded of the descending broadening wedge that currently houses price action. This descending wedge support and descending broadening wedge resistance create a smaller descending wedge as well. While I am not convinced of the conviction for a bullish reversal at this point, the aforementioned pattern does bring up a possible third path to bullishness whereby price doesn't initially breach $7200 at this time but also does not fall below its recent low either. Instead, we see it create a triangle pattern, similar to the first 1.5 weeks of April (which if you've been following me you know I continue to watch), or that descending wedge and then price breaks out via a short squeeze. This potential path isn't as crazy as it might sound due to the significant build up in shorts recently, which are creating their own ascending wedge. That is a bearish pattern and should result, as it has always done in the past for shorts, in a squeeze.
As far as indicators go on this time frame, we are watching the resistance line noted on RSI as well as the ascending channel in MACD. The negative histogram in MACD should also be watched as any upward momentum on the daily should cause MACD to pull away from the signal line thereby decreasing the size of the histogram. This will result in bullish divergence which, on the daily, is a strong signal and we should see a few days of price appreciation at least.
Remember, CBOE futures expired yesterday. What does this mean? If you're buying futures, are you going long or short based on yesterday's price? If you said short, that would be an extremely risky play. Why? Because daily RSI was oversold (historically results in a bull run) while price was in a major support area. Additionally, shorts have been building up at a frenzied pace, similar to what happened prior to the April 12th short squeeze where we saw a $1000+ price increase in an hour as a result, and have created an ascending wedge while doing so. While nothing in trading is ever guaranteed, this builds up a heck of a potential story for why price would rise rather than fall at this time. Of course, as mentioned previously, if we do see price fall then it is likely to be more of a flash dump and large rebound.
As far as indicators go on this time frame, we are watching the resistance line noted on RSI as well as the ascending channel in MACD. The negative histogram in MACD should also be watched as any upward momentum on the daily should cause MACD to pull away from the signal line thereby decreasing the size of the histogram. This will result in bullish divergence which, on the daily, is a strong signal and we should see a few days of price appreciation at least.
Remember, CBOE futures expired yesterday. What does this mean? If you're buying futures, are you going long or short based on yesterday's price? If you said short, that would be an extremely risky play. Why? Because daily RSI was oversold (historically results in a bull run) while price was in a major support area. Additionally, shorts have been building up at a frenzied pace, similar to what happened prior to the April 12th short squeeze where we saw a $1000+ price increase in an hour as a result, and have created an ascending wedge while doing so. While nothing in trading is ever guaranteed, this builds up a heck of a potential story for why price would rise rather than fall at this time. Of course, as mentioned previously, if we do see price fall then it is likely to be more of a flash dump and large rebound.
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