It appears to me that the Hagopian rule is about to play out and we are getting a chance to enter this trade with a very small stop.
The Hagopian rule
This rule is invoked once a confirmed pitchfork breaks without the price ever reaching the median line, what should follow is a bigger movement in the opposite direction.
I was bearish, but I must admit...the bulls have it.
SPX has broken out of the range that it created in 2015 and has the potential to double it. Trend-wise we are in a trend inside a trend, inside another trend and all of them are pointing up. In other words the movement will be straight and rapid, but also terminal. At the top of the range the bulls will quickly...
I have discovered a very simple and surprisingly effective way to construct pitchforks based on Hull MA (100), in all of the similar cases a sliding parallel near the middle line has worked as a high-probability target. Should price move so rapidly that it penetrates thru the middle line you can expect target #2 to be reached, however it is more common for price...
Seems to me that bulls were a bit hasty first time we tested the buying zone and not everybody had a chance to get in. This can of course be viewed as a presence of strong bullish mood by those who are willing to long below 5 990.
Reasons for action:
1) Pitchfork lines commonly act as support/resistance.
2) Above 10 114 begins a selling zone.
3) Price has yet to re-test the middle line of the down-sloping pitchfork.
4) We are still inside of a working down-sloping pitchfork and as the price rises, so does the probability of bearish mood.
I believe that DAX will hit critical buyers somewhere between 6 and 5 k, so there is a good way left. However we are now extending past the latest swing low, this movement cannot continue forever and should be exhausted by the time we reach 8 200s. In other words we may expect a surge back to 10 100s, where DAX should find more powerful sellers before it gets...
After a false breakout, followed by an acceleration to the downside, we briefly found ourselves visiting the red area (50 %) of the fib retracement. Essentially I took it as a clear sign of a dying bullish trend, but just like in every classic case we now made it back to the yellow area (23,6 %) before continuing to fall. The fall itself I expect will begin shortly.