Whenever you see a large sell-off and the price dropping without any meaningful retracements or relief rallies in between the drops, you can be almost certain there will be a sharp and fast move to the upside sooner or later.
The price has been moving in a falling wedge for a few days now. A falling wedge is a bullish reversal pattern and indicates exhaustion of sellers.
If you've followed my charts so far, you know I like to trade wedges due to their reliability (you can look at the ones I posted previously and how they played out).
Even better if the wedge forms on a larger timeframe such as 4h+ chart.
The wedge pattern currently formed has met the minimum required conditions (two touches to the support line, each with less volume than the previous one). Ideally three reactions on the support line increase the reliability (which means another small drop to make a lower low is not out of the cards, but not as likely at this point).
Notice also the black dotted lines next to the wedge . This is the downtrend channel which has contained the price between those two parallels for 8 weeks now. Breaking out of it will be a very good sign. Getting rejected at those lines will also be a very bad sign, since it woud indicate further drop and possibly making new lows.
If the price breaks out of the wedge , then the active targets are:
1. 6419
2. 6560 (conservative take-profit area)
3. 6617-6670 (main take-profit area)
4. 6799
IF the momentum is so strong that it manages to break 6800, then we're likely going to see 7000+. Still too early to call that at this point. But I've marked the resistance levels on the chart in case it gets there, so those can be used as targets.
We might see a pullback down to 6100-6000, area (should not close below 5950-5900 support zone , or else this move will turn into a fakeout and the momentum will lose its power).
Note also that the breakout of the wedge must happen before 7th of July (that's the latest, but ideally it should happen by the end of June), otherwise the wedge will fill and lose its power. If that happens, we won't be able to rely on the wedge anymore.
To answer the question in the title above:
It's too early to call THE bottom here. But it's most likely the bottom for now, and at least for the next days of price movement.
We will see more clues as we go. For now, let's see how this plays out.
The price has been moving in a falling wedge for a few days now. A falling wedge is a bullish reversal pattern and indicates exhaustion of sellers.
If you've followed my charts so far, you know I like to trade wedges due to their reliability (you can look at the ones I posted previously and how they played out).
Even better if the wedge forms on a larger timeframe such as 4h+ chart.
The wedge pattern currently formed has met the minimum required conditions (two touches to the support line, each with less volume than the previous one). Ideally three reactions on the support line increase the reliability (which means another small drop to make a lower low is not out of the cards, but not as likely at this point).
Notice also the black dotted lines next to the wedge . This is the downtrend channel which has contained the price between those two parallels for 8 weeks now. Breaking out of it will be a very good sign. Getting rejected at those lines will also be a very bad sign, since it woud indicate further drop and possibly making new lows.
If the price breaks out of the wedge , then the active targets are:
1. 6419
2. 6560 (conservative take-profit area)
3. 6617-6670 (main take-profit area)
4. 6799
IF the momentum is so strong that it manages to break 6800, then we're likely going to see 7000+. Still too early to call that at this point. But I've marked the resistance levels on the chart in case it gets there, so those can be used as targets.
We might see a pullback down to 6100-6000, area (should not close below 5950-5900 support zone , or else this move will turn into a fakeout and the momentum will lose its power).
Note also that the breakout of the wedge must happen before 7th of July (that's the latest, but ideally it should happen by the end of June), otherwise the wedge will fill and lose its power. If that happens, we won't be able to rely on the wedge anymore.
To answer the question in the title above:
It's too early to call THE bottom here. But it's most likely the bottom for now, and at least for the next days of price movement.
We will see more clues as we go. For now, let's see how this plays out.
Comment:
To additionally address a very good point in the comment below, here are more clues about selling momentum exhaustion (usually forming in combination with a falling wedge which gives it more validity).
Dovergences in RSI, MACD and volume/price.
This does not guarantee that the bottom is set here, but it is a VERY good combination of signs that the bottom has been either set here or is very near (one last touch of the support line on lower volume is not out of the cards as I wrote in the analysis above).
Dovergences in RSI, MACD and volume/price.
This does not guarantee that the bottom is set here, but it is a VERY good combination of signs that the bottom has been either set here or is very near (one last touch of the support line on lower volume is not out of the cards as I wrote in the analysis above).
Comment:
The pullback I mentioned is now in process.
Touched the first support line to the dollar.
Touched the first support line to the dollar.
Comment:
After a pullback to the minimum retracement support line, we see another more serious attempt at a breakout. The price touched the upper resistance boundary to a dollar again.
Volume looks very good. Possible to break out here, but even if it retraces down to 6150-6100 again, this looks very good so far.
Volume looks very good. Possible to break out here, but even if it retraces down to 6150-6100 again, this looks very good so far.
Comment:
Bearish diamond pattern forming. These are rare, but it's worth considering as it may help estimate how far the price may drop if it breaks down.
The maximum projected target of this pattern is 5950, which coincidentally is a key support.
It may happen that the price bounces from one of the supports before that, but I'm simply giving you the projected target of the pattern here. They don't always meet their maximum targets (in fact, often they don't).
That is of course only if it is confirmed (the price breaks and closes below the support line of the diamond).
The maximum projected target of this pattern is 5950, which coincidentally is a key support.
It may happen that the price bounces from one of the supports before that, but I'm simply giving you the projected target of the pattern here. They don't always meet their maximum targets (in fact, often they don't).
That is of course only if it is confirmed (the price breaks and closes below the support line of the diamond).
Comment:
To be clear, I still think we've reached a temporary bottom on the bigger timeframe. I will stand by that as long as the 5950-5900 is not broken.
I posted the chart of the bearish diamond above only as a potentially helpful indicator that could show us where a viable buy zone might be during this retracement. Not because I'm bearish or because I expect new lows.
I posted the chart of the bearish diamond above only as a potentially helpful indicator that could show us where a viable buy zone might be during this retracement. Not because I'm bearish or because I expect new lows.
Comment:
The volatility is dropping to lows again. If you remember from my previous updates, you know what it means when ADX goes below 10 on thr 4h chart. In this case, we have ADX around 8.
ADX not indicating direction, but the size of the breakout and the move that will happen. In this case, this is a potential 300-400 point move preparing to happen very soon.
ADX not indicating direction, but the size of the breakout and the move that will happen. In this case, this is a potential 300-400 point move preparing to happen very soon.
Comment:
The bearish diamond played out. Though a fakeout and a strong rejection happened first.
As written in my previous updates, the projected target of the diamond is 5950.
The support at 5900-5950 should hold this drop for now. If that gets broken, then things get tricky and a lot less reliable.
As written in my previous updates, the projected target of the diamond is 5950.
The support at 5900-5950 should hold this drop for now. If that gets broken, then things get tricky and a lot less reliable.
Comment:
The bearish diamond target has been met, the price touched 5985, which was in the targeted area mentioned previously.
The support held up and we're currently seeing some consolidation here with good signs in the price action so far.
It's likely to consolidate here in this range (6150-6060) for a while, but bullish breakout might follow after the consolidation and sideways / range movement.
The key support is still 5900-5950 area.
A break above 7260-7300 (if we see it) should give a nice acceleration to the upside.
The support held up and we're currently seeing some consolidation here with good signs in the price action so far.
It's likely to consolidate here in this range (6150-6060) for a while, but bullish breakout might follow after the consolidation and sideways / range movement.
The key support is still 5900-5950 area.
A break above 7260-7300 (if we see it) should give a nice acceleration to the upside.
Comment:
Small typo above: A break above 6260-6300 (not 7, sorry)
Comment:
Broke the main support zone at 6900-6950 marked on the main chart above.
That support zone has now turned into resistance.
If it holds here and manages to break above through 5940-5960 resistance, and then thorugh 6030-6060, then this would be a higher low formed.
However, closing the daily candle here (13 minutes ago) was not a good sign, and it has to break above within the next day, otherwise this will most likely get pulled lower after some sideways movement.
Main resistance now at 6030-6060 area.
The price is still inside the broader support zone, but it must not stay here too long after this kind of sharp drop with volume, or else it will simply continue down to 5600 to touch the lower line of the wedge where it still has a good chance of bouncing from.
That support zone has now turned into resistance.
If it holds here and manages to break above through 5940-5960 resistance, and then thorugh 6030-6060, then this would be a higher low formed.
However, closing the daily candle here (13 minutes ago) was not a good sign, and it has to break above within the next day, otherwise this will most likely get pulled lower after some sideways movement.
Main resistance now at 6030-6060 area.
The price is still inside the broader support zone, but it must not stay here too long after this kind of sharp drop with volume, or else it will simply continue down to 5600 to touch the lower line of the wedge where it still has a good chance of bouncing from.
Comment:
*Support zone at 5950-5900 (not 6950, sorry, too bad there's no edit button here)
Comment:
Broke out of the wedge. A beautiful, glorious breakout with volume. All we wanted to see from this setup.
If the candle closes above the resistance here, the targets are active.
If the candle closes above the resistance here, the targets are active.
Comment:
Watch for a potential pullback down to 6190-6130 zone.
The daily candle closes in 50 minutes. If it closes like this, this will be a very good thing.
The daily candle closes in 50 minutes. If it closes like this, this will be a very good thing.
Comment:
First two main (conservative) targets reached.
Excellent momentum. This is what we wanted to see here.
Likely to keep going towards our targets above after some consolidation.
Excellent momentum. This is what we wanted to see here.
Likely to keep going towards our targets above after some consolidation.
Comment:
So far everything is still going as expected. The levels marked on the main chart still serve as good indicators of support and resistance zones.
The wicks hitting the lines (when you press "play") are a good validation that we've identified the levels correctly (very important).
Might see more of this mostly boring sideways movement while the price consolidates before making the next move.
In the meantime, 6250 is the minor support.
6200-6180 is a strong support and it should hold if this breakout is to have any real power behind it.
6080 is the level that has to hold by all means, or else, below it this could switch to bear mode again (unlikely at this point, but always keep an open mind).
On the upside, breaking and closing above 6420-6450 resistance should open door towards 6600s.
The wicks hitting the lines (when you press "play") are a good validation that we've identified the levels correctly (very important).
Might see more of this mostly boring sideways movement while the price consolidates before making the next move.
In the meantime, 6250 is the minor support.
6200-6180 is a strong support and it should hold if this breakout is to have any real power behind it.
6080 is the level that has to hold by all means, or else, below it this could switch to bear mode again (unlikely at this point, but always keep an open mind).
On the upside, breaking and closing above 6420-6450 resistance should open door towards 6600s.
Trade closed: target reached:
Now press "play" on the main chart above. Take a good look at where that wick has hit.
Our main take-profit area has been reached!
I closed part of my position when that wick hit my sell order.
Part of it left open, looking for higher targets after a possible shallow retrace.
6550-6500 area is now a new minor support.
This played out perfectly.
Our main take-profit area has been reached!
I closed part of my position when that wick hit my sell order.
Part of it left open, looking for higher targets after a possible shallow retrace.
6550-6500 area is now a new minor support.
This played out perfectly.
Comment:
10 points shy of reaching the 4th target. The price is still respecting the support/resistance levels marked on the main chart above. We seem to have a breakout attempt here after a healthy retrace to the support zone (previous resistance turned support, and tested as support).
Now what we ideally want to see after this candle is a test of 6700-6680 area to confirm it as a new support, and then either consolidation (sideways) for a while above 6700, or another fast push towards 6900 to show strength and interest from buyers. Both scenarios are bullish.
New minor support is now also 6600.
If we see these things play out as expected, the next targets (7k and above) marked on the chart above have a fairly high chance of being reached.
Now what we ideally want to see after this candle is a test of 6700-6680 area to confirm it as a new support, and then either consolidation (sideways) for a while above 6700, or another fast push towards 6900 to show strength and interest from buyers. Both scenarios are bullish.
New minor support is now also 6600.
If we see these things play out as expected, the next targets (7k and above) marked on the chart above have a fairly high chance of being reached.
Comment:
The price is forming a rising wedge, and that is not something we want to see here.
What I wrote above about expecting a retrace and confirming 6680-6700 as support did play out, but so far, this doesn't look like the support here will hold (especially touching 6700 again and getting rejected, indicating that's a resistance again).
A breakdown of the wedge support line is likely to take the price down first to 6420, and then to 6350-6260 support zone. Confirmation of the breakdown will be if the price closes below 6560.
To be clear, that is still not bearish. A retrace to those levels (6350-6260) would be perfectly normal, and it could potentially offer better buying opportunities.
What I wrote above about expecting a retrace and confirming 6680-6700 as support did play out, but so far, this doesn't look like the support here will hold (especially touching 6700 again and getting rejected, indicating that's a resistance again).
A breakdown of the wedge support line is likely to take the price down first to 6420, and then to 6350-6260 support zone. Confirmation of the breakdown will be if the price closes below 6560.
To be clear, that is still not bearish. A retrace to those levels (6350-6260) would be perfectly normal, and it could potentially offer better buying opportunities.
Comment:
Broke down from the wedge as expected. Wedges are fairly reliable patterns (both falling and rising wedges). So never ignore or disregard a wedge when you see it forming on a chart.
The price touched 6420 support precisely as written above in my previous update.
I won't post a chart snapshot here to save some space for future updates, otherwise this post will get too bulky with all the chart images on it.
Also, there's no need to post a snapshot when the lines on the main chart above work perfectly well. Simply press "play" and watch the price bouncing to and from the lines. Each broken resistance is now a support, and you can see it in action.
If the 6420 support breaks, next support zone is at 6350-6260 area (big red zone on the main chart).
The price touched 6420 support precisely as written above in my previous update.
I won't post a chart snapshot here to save some space for future updates, otherwise this post will get too bulky with all the chart images on it.
Also, there's no need to post a snapshot when the lines on the main chart above work perfectly well. Simply press "play" and watch the price bouncing to and from the lines. Each broken resistance is now a support, and you can see it in action.
If the 6420 support breaks, next support zone is at 6350-6260 area (big red zone on the main chart).
Comment:
Something to keep an eye on.
ADX on the 4h chart is at extremely low level.
(ADX is a volatility indicator, doesn't give you the direction but it gives you the size of the move that is about to happen).
In this case, ADX shows a move potentially of 700-1000+ points is about to happen.
Those 1000 points don't have to all be in one direction, (e.g. it can go to 6200, and then bounce back and continue 800+ points to the upside). But they will be in one single move (no long boring consolidations in between)
In any case, it means we are very close (within 16 hours or so) to seeing some real volatility again, after these super boring couple of days in this range.
The support levels are marked on the chart above, they're still the same.
If the bullish scenario has a chance to play out (I believe it does), then the price must not close below 6180-6150 area.
A break and close above 6800 will confirm a move to 7000+ targets marked on the main chart.
Right now, I thing we're likely to see a drop to 6350-6260 area at least. Maybe even touch 6180, IF 6260 doesn't hold. After those levels are reached, I expect buyers to show up and push this back to the upside again.
That's two steps ahead, but I like to focus only on the very next step, and that is in this case the drop down to the targets written above.
Then let's see how it reacts there.
ADX on the 4h chart is at extremely low level.
(ADX is a volatility indicator, doesn't give you the direction but it gives you the size of the move that is about to happen).
In this case, ADX shows a move potentially of 700-1000+ points is about to happen.
Those 1000 points don't have to all be in one direction, (e.g. it can go to 6200, and then bounce back and continue 800+ points to the upside). But they will be in one single move (no long boring consolidations in between)
In any case, it means we are very close (within 16 hours or so) to seeing some real volatility again, after these super boring couple of days in this range.
The support levels are marked on the chart above, they're still the same.
If the bullish scenario has a chance to play out (I believe it does), then the price must not close below 6180-6150 area.
A break and close above 6800 will confirm a move to 7000+ targets marked on the main chart.
Right now, I thing we're likely to see a drop to 6350-6260 area at least. Maybe even touch 6180, IF 6260 doesn't hold. After those levels are reached, I expect buyers to show up and push this back to the upside again.
That's two steps ahead, but I like to focus only on the very next step, and that is in this case the drop down to the targets written above.
Then let's see how it reacts there.
Comment:
Target 4 on the main chart now fully reached (was 10 points shy on the previous move up).
This attempt at a breakout happening here without a deeper retrace makes things interesting now. A daily candle close above 6830 would confirm that was all the retrace we've seen, and the higher targets would become active. 20 minutes until the daily candle closes.
If the daily candle closes below that level however, I won't be 100% convinced (yet). A sign of strength nonetheless.
New minor support now at 6700-6685 area.
This attempt at a breakout happening here without a deeper retrace makes things interesting now. A daily candle close above 6830 would confirm that was all the retrace we've seen, and the higher targets would become active. 20 minutes until the daily candle closes.
If the daily candle closes below that level however, I won't be 100% convinced (yet). A sign of strength nonetheless.
New minor support now at 6700-6685 area.
Comment:
The price didn't manage to get a daily candle close above 6830, therefore this breakout still hasn't been confirmed with strength. In fact, I see some signs of weakness here, indicating we might see a small drop. It might make another attempt to break 6830, maybe even touch 6900, but unlikely to have enough power to push through before making a retrace down first.
Current target for the drop is 6670-6580 area.
Current target for the drop is 6670-6580 area.
Comment:
Reached the first target zone. Touched 6670 to the dollar. This was first wave. I expect more downside to follow after a while.
Comment:
Second drop happened as expected. Touched the second support line at 6620 to the dollar as well. The daily candle closes in 20 minutes, and if it closes below 6730, it's likely we'll see another drop tomorrow.
6580 is the next support.
6450 if 6580 doesn't hold.
6580 is the next support.
6450 if 6580 doesn't hold.
Comment:
The daily candle yesterday clsoed below 6730, therefore, this further drop was expected as already mentioned previously. The support at 6580 did not hold, and now It hit the target support zone at 6450-6420.
Current support level seems to be holding, but is this the end of the drop?
Possible, but not likely. Look for reversal signs in the 6350-6280 area first, and then in 6180-6100 area which should hold for the bullish scenario to have any hope to play out.
On the daily chart, a possible inverse head and shoulders pattern forming.
IF it holds at the key support and we see a bounce there, then it may have a chance of completing the pattern with targets around 7400-7600 area.
Since this is on daily chart, note that it may take a week or so to form the right shoulder, so don't expect a reversal fast.
(while I was writing this, another drop happened and took the price to 6350-6280 support zone. Let's see how it behaves here.
Current support level seems to be holding, but is this the end of the drop?
Possible, but not likely. Look for reversal signs in the 6350-6280 area first, and then in 6180-6100 area which should hold for the bullish scenario to have any hope to play out.
On the daily chart, a possible inverse head and shoulders pattern forming.
IF it holds at the key support and we see a bounce there, then it may have a chance of completing the pattern with targets around 7400-7600 area.
Since this is on daily chart, note that it may take a week or so to form the right shoulder, so don't expect a reversal fast.
(while I was writing this, another drop happened and took the price to 6350-6280 support zone. Let's see how it behaves here.
Comment:
My previous update had all the information about what to expect from this drop, and since I want to see this scenario play out on the daily chart, there was no need to update more frequently. Esepcially when things are progressing as expected.
The support at 6350-6280 did not hold (that was the first potential bounce area), and now the price is at the beginning of the crucial support zone 6180-6100 as written above.
The iH&S pattern is still in play. However, the price must NOT close a daily candle below 6100-6080 level. Wicks are fine (but ideally, no wicks either).
In case this crucial support zone doesn't hold and we see a daily candle close below those levels, this will easily turn into full-on bear mode. Next support below is at 5850, but considering it would be tested for the third time, I doubt it will hold.
Again, since this setup is forming on the daily chart, what we ideally want to see here is this support holding, maybe some sideways accumulation for a day or two, and then a nice green candle breaking the 6400 resistance. That will be the first sign of confirmation that the price is going for a retest of 6800 resistance.
The support at 6350-6280 did not hold (that was the first potential bounce area), and now the price is at the beginning of the crucial support zone 6180-6100 as written above.
The iH&S pattern is still in play. However, the price must NOT close a daily candle below 6100-6080 level. Wicks are fine (but ideally, no wicks either).
In case this crucial support zone doesn't hold and we see a daily candle close below those levels, this will easily turn into full-on bear mode. Next support below is at 5850, but considering it would be tested for the third time, I doubt it will hold.
Again, since this setup is forming on the daily chart, what we ideally want to see here is this support holding, maybe some sideways accumulation for a day or two, and then a nice green candle breaking the 6400 resistance. That will be the first sign of confirmation that the price is going for a retest of 6800 resistance.
Comment:
If you read the previous update 4 days ago, or at least the last paragraph above, you will see that it played out exactly as described (not because I "predicted" anything, but because I wrote what I wanted to see in order to confirm the bullish scenario).
Trading this on the daily chart (based on the last two updates) eliminated lots of noise and fake moves.
If you take a look at the main chart at the top of this page, you may also learn an important lesson about support/resistance levels (notice, they are not fib lines). They STILL apply today, even though the chart was posted 20 days ago. The wicks never lie (when you see them hit a line multiple times on the way up as well as on the way down, you know that line is where you need to pay attention).
After a nice breakout candle with good volume, the price is currently testing the resistance zone at 6620-6670 area. It is unlikely that it will continue breaking this higher right away without at least some consolidation here (meaning hours of sideways), or a potential pullback down first (on low volume).
The first support is now 6560, and the second, much stronger support zone is 6460-6400 area.
To the upside, a strong break above 6670 will likely push this to 6780-6800 resistance. I don't expect that to be broken easily. But once 6830 resistance is broken (which is also the neckline of the inverse H&S pattern I posted in previous updates), then the 7000+ targets on the main chart will become active.
(daily chart below)
Trading this on the daily chart (based on the last two updates) eliminated lots of noise and fake moves.
If you take a look at the main chart at the top of this page, you may also learn an important lesson about support/resistance levels (notice, they are not fib lines). They STILL apply today, even though the chart was posted 20 days ago. The wicks never lie (when you see them hit a line multiple times on the way up as well as on the way down, you know that line is where you need to pay attention).
After a nice breakout candle with good volume, the price is currently testing the resistance zone at 6620-6670 area. It is unlikely that it will continue breaking this higher right away without at least some consolidation here (meaning hours of sideways), or a potential pullback down first (on low volume).
The first support is now 6560, and the second, much stronger support zone is 6460-6400 area.
To the upside, a strong break above 6670 will likely push this to 6780-6800 resistance. I don't expect that to be broken easily. But once 6830 resistance is broken (which is also the neckline of the inverse H&S pattern I posted in previous updates), then the 7000+ targets on the main chart will become active.
(daily chart below)
Comment:
Looks like we have a breakout of the neckline. Targets above are now active.
I'm not at home right now so can't post more detailed analysis, but will do it later.
Targets for 7k+ are marked on the main chart.
I'm not at home right now so can't post more detailed analysis, but will do it later.
Targets for 7k+ are marked on the main chart.
Trade closed: target reached:
Another main take-profit area reached (7458). Hit by a wick once again. This is all still referring to the main chart above. I keep repeating this, but it's still the chart with all the levels marked on it. As long as the price is below 7727, you can use those levels as support/resistance lines quite reliably (as you can see by pressing "play").
The second update I wrote on 10th of July above, posting the chart of inverse H&S. The conservative target of that H&S was our 7458 line, and it has now been reached.
There is one last target left on the chart, and that is 7727. While it is possible that after some consolidation here, the price may continue to reach it and then make a larger correction down to 7100, I give more odds to a retrace from here (7350-7400) down to 7100-7000 area (potentially all the way down to 6900, depending on the momentum). Once that level is confirmed as a support, it should offer a safer buy entry with targets at 7450 and 7720.
If we do not see any meaningful retrace from here and instead the price continues to 7727 target, then I will consider that as a potential short sell entry, targeting 7100.
All in all, this analysis has reached all the main targets in an ideal way (I wish TA worked this well all the time in this market).
The second update I wrote on 10th of July above, posting the chart of inverse H&S. The conservative target of that H&S was our 7458 line, and it has now been reached.
There is one last target left on the chart, and that is 7727. While it is possible that after some consolidation here, the price may continue to reach it and then make a larger correction down to 7100, I give more odds to a retrace from here (7350-7400) down to 7100-7000 area (potentially all the way down to 6900, depending on the momentum). Once that level is confirmed as a support, it should offer a safer buy entry with targets at 7450 and 7720.
If we do not see any meaningful retrace from here and instead the price continues to 7727 target, then I will consider that as a potential short sell entry, targeting 7100.
All in all, this analysis has reached all the main targets in an ideal way (I wish TA worked this well all the time in this market).
What we don't want to see are sharp sell-offs and big red candle closes (wicks are fine).
That can indicate it's not a pullback but an actual failure of a breakout which results in price being rejected at the resistance and making new lows.
So far, this looks good and as expected.