16/4/26 Can Bulls Create A Pullback? Strong or Weak?

1. The market formed a second leg sideways to down, trading below the 20-day EMA and testing near the 4430 level.
2. In our last report, we said traders would watch if bears could create follow-through selling below the 20-day EMA, or if the market would stall around the 20-day EMA or around the 4450-4500 area instead.
3. Bulls view the current move as a deep pullback and hope to get a retest of the April 1 high, even if it makes a lower high; forming the right shoulder of a head and shoulders pattern.
4. They want the market to reverse back above the 20-day EMA.
5. If the market trades lower, they hope the 4000 or the 4350 prior breakout point will act as support.
6. Bears created a tight bear channel down from a higher high major trend reversal.
7. The move down is strong enough for traders to expect a second leg sideways to down after a pullback.
8. If the market trades higher, bears want the 20-day EMA to act as resistance.
9. Fundamentals:
10. • Production: Production for April up +26.77% in the first 10 days for SPPOMA
11. • Refineries: So far, buying according to spot futures level. Appetite looks ok.
12. • Exports: Export in April first 15 days down -34.18% - Per ITS
13. The market formed a tight bear channel trading below the 20-day EMA, indicating persistent selling.
14. For now, traders will watch if bears can continue create follow-through to test the 4350 area.
15. Or will the market form a pullback to the 20-day EMA in the days ahead?
16. If a pullback forms, traders will watch the strength of the move. If it is strong with consecutive strong bull bars, traders will expect a higher retest of the April 1 high. If it is weak and lacking in follow-through buying, traders will expect a lower price moving forward.

Andrew