4xForecaster

Structural Analysis Lesson: Up or Down? | #forex

FX:ITA40   FTSE MIB index of Italian listed shares
514 7 6
Friends,

Following in the thread is a lengthy, developed explanation of a strictly technical approach to determining whether price has a probability of rising or falling, given its circumstance, which here suggests that price is "at the fork on the road", having met its resistance/support levels into a wedge.

While my predictive analyses and forecasts are generated through a separate methodology ("Predictive/Forecasting Model"), it is not a rare thing to have recourse to the basics.

Of review here is trend, trendline, basic geometry, and structural analysis for the purpose of determining "what's next" in terms of probability, which is what we are left with in trading.

Thank you for your readership and support, and your participation in this superb TradingView.com platform and vibrant community of traders.

Best,


David Alcindor, Moderator
Predictive Analysis & Forecasting
Denver, Colorado - USA


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Twitter: @4xForecaster
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David Alcindor, CMT Affiliate #227974
Alias: 4xForecaster (Twitter, LinkedIn, StockTwits)

Signal Service or Private Course - Contact: admin@KADAInstitute.com
All updates on https://twitter.com/4xForecaster
(cut and pasted from a private post)

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Hello, xxx:


Re: ITA-40:

Watch for the following parameters in the WEEKLY or even DAILY chart - Do NOT go any lower, as the timeframe at current price levels is being controlled by daily/weekly traders, so follow THEIR moves closely.

Here is what I am seeing for the moment, on a pure structural and trendline basis:

1 - A multi-year trendline closed this week's trading by capping at as a last resistance of the week (see down arrow #3 in PURPLE). This is likely to keep the retail traders on their toes, as the expectation is now to whether price would carve a new structural height above this major resistance, or whether it would cede to it and reverse course. n a downward fashion.

2 - A support line defined by up-arrows #2 and 3 in GREEN has provided TWO validation points off of these two arrows.

What is MOST important but is not seen very well in the chart, is that this rallying off of #2 was generated AFTER price carved a slightly lower low relative to #1 in GREEN.

Why is this important?

This is a crucial piece of the story, and more important than point #1 made above, because it is telling you that:

1 - price has generated a lower low on a significant historical basis;

and

2 - Despite the recent rallying in price, the general directional gist remains BEARISH, as price has only risen to the wedge geometry to its historical left without ever surpassing it - This suggests that the institutional bears that have generated that geometry are not quite interested to let price exceed this range as of yet. Combined with the multi-year resistance defined above, there is more concern for bulls here than should be granted for bears - In other words:

1 - The general historical trend is BEARISH
2 - The recent bullish swing has met significant geometric and trendline bearish entrenchments
3 - The general "gait" of historical price action remains defined as "lower-lows and lower highs
4 - Absolutely NO structures have been transgressed to the upside to suggest that price is ready to bring bull to the upper side of the trend.

OUTLOOK:
- Bearish

STRAT:
- Look for several tell-tale sign of a probable directional change based on the following increased indices of suspicion:

1 - Price breaks above the level of purple arrow #3 (MODERATE PROB.)

2 - Price breaks above the minimal structural level at 22553 (HIGH PROB.)

3 - Price breaks above the maximal structural level at 24555 (CONFIRMATION)

INDICATOR SUPPORT - RSI

I set my RSI at 14, hlc/3 to include the recency of price action.

At near 50, the RSI is telling you that there is a balanced market action upon price, and that is quite what you want to see right at the overhead resistance acting upon price, as a correlative event.

Next, see that your RSI is coming from the bottom before meeting that balanced figure, as opposed to the top. This suggest that bulls have been stomped by an equal but opposite force, all of this occurring right at the correlative event of price closing the week market at its multi-year trendline.

This should suggest that the NET impact on price, considering RSI, trendline structural analysis and implied geometry is BEARISH.

The dashed RSI arrow implies a lower directional probability compared to its solid antipod.


CONCLUSION - Keep the structural levels in sight, and consider the basic structural information which these simple chart always make available. Here, the bulls have tried to gain ground, but failed as far as all the prior weeks from arrow #1 in GREEN goes, up to this week.

Next few weeks should reveal the directional intention of the market.

In the mean time, look for a geometric "pretext" for price to either rally or decline. Wolfe Waves are a great hounding beasts for this type of objective work.

Best,

David Alcindor

PS: I will post this analysis for other traders to read without exposing any of your personal information. I appreciate your contacting me and giving this opportunity to rescue your account, if indeed this analysis ends up doing that. If anything, there should be some value in the scathing and scraping wounds that challenging markets leave on the trader's psyche, and this alone is valuable, so long as it is used to avoid repeating the same mistake again. Biggest mistake,as you know is NOT about being wrong on the direction of the market, but to allow oneself to be wrong in incremental ways that do not wipe your account out. One can lose ten times and earn once only if the stop-loss, risk management and profit-taking habit are employed strictly.

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David Alcindor
Reply
23 JAN 2015 - Chart:


snapshot



David Alcindor
Reply
takefal 4xForecaster
2 years ago
Thanks David for a detailed explanation of the chart. For a new trader in the market this is a valuable contribution and a good lesson!!!
+1 Reply
4xForecaster PRO takefal
2 years ago
@takefal - Glad you enjoyed this.

David
Reply
2use
2 years ago
I enjoyed this!
+1 Reply
4xForecaster PRO 2use
2 years ago
Great.

David
Reply
Thanks David! Great as ever. :)
+1 Reply
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