Well, this isn't the kind of chart bulls want to wake up to on a Monday morning! After a 3 day consolidation, the significant off recent lows was lost. This suggests to me those lows themselves want/need to be tested. Neither nor momentum is of help to the bulls either. Moving average resistance now appears to be quite significant suggesting the recent consolidation zone (green lines) is now basically a brick wall of resistance. While no one really knows what will come, in my humble opinion this looks like a very heavy market. She hasn't broken just yet, but she sure looks heavy.
If she looks heavy, where are some likely destination zones if she does indeed decide to break? Three areas of the market have my specific attention at the moment. First, the recent lows near $545 (and the 38.2 Fib off the entire range) sure looks like an area that needs to be tested. Second, a 50% retrace ( ty Mr. ) of the spring 2014 rally would bring price back to $504. Put the 50% level together with the fact that $500 itself is a huge psychological number and to see price spend considerable time playing on either side of that huge level wouldn't be a big surprise at all. Lastly (and really probably the most significant), the Optimal Trade Entry ( OTE ) zone of the entire rally off the bottom is currently between $410 and $460.. The sweet spot itself is $437 or more than $150 lower then where we currently are. Yes, that is considerably far away, but it certainly is a very realistic level to keep an eye on. The level itself doesn't represent a target to me, more of an area where if entered institutions might start buying.
So with this wonderful (sarcastic) backdrop, what's a person to do?
Range Strategist: may consider buying against these lows (38.2 Fib) with the anticipation of a test of the upper end of the massive trading range (543 to 668)
Trend Follower: may consider shorting on a break of the recent lows as that would represent a massive daily . That trade needs quite a bit of room to breath and ought to risk to a break of that trading range's top way up at 668.
Considering there is about $30 between where we currently are and those key lows at 545, if you are a range trader you ought to be either in the trade of getting close. If you are a trend follower, a break of these key lows shall represent a rather significant event in the market. If unable to get short on that specific level, then patience must be exercised to remain working orders at the level and not chase the market.
Oh so much to consider....a trader's life...
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