Yesterday’s session started as a bear trap but then slowly transitioned into the first significant selling pressure for the past few weeks. Bulls and bears alike were getting reamed and staying ahead of the tape took quite a bit of doing.
The trap at the open was rather obvious. If you were a Zero sub then you must have paid attention to a distinct non-confirmation during the first gab down (right panel). Most interestingly the signal remained flat during the fast advance higher, which sometimes simply suggests a stop run initiated by institutional traders/bots/prop desks. However the failure at VWAP was the first sign that further weakness may be in the cards.
Most importantly however the expanding negative signal suggested that we may facing some real selling pressure here. Given that new information and the LT context below odds are increasingly supporting a sideways high volatility phase followed by a trending high volatility and then trending low volatility phase. In other words – at this point I do not expect resolution in the near future – most likely we shake out some weak hands and then either take off or fall off the plate.
This may sound like a problem but actually it affords us an opportunity to make use of additional technical context we are currently lacking. The long term panel is the only one which currently offers us upside resistance, otherwise we are pretty much in limbo land on the daily and hourly panels. And those are what I personally use for entry points.
So at this point I would propose we stand by and let the next few sessions play out. It will also be valuable to watch the Zero – should we see selling pressure expansion then the odds for a large downside correction may increase – if the signal remains relatively flat or positive then I think we continue to the upside.
AUD/CHF – a tepid long here with a stop below last night’s touch of the 25-day SMA. If you want wait for a little dip lower on meager participation which would increase the odds quite a bit.
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