Today, reversed that with a big gap down open and follow through down. Should price close below yesterday’s low, it will be a “99 percenter” down.
Price has already made a new 4 Close low. It needs to close below December 24th’s close to be a valid sell signal.
There are several key levels during the day. Yesterdayʼs close is one of the biggest. Here we see it in action. Tuesday, December 16, saw a gap down open with no follow thru down. Price rallied up to near yesterdayʼs close. It failed to break up through it on itʼs firs attempt. The second try at 10:15 showed a Yum-Yum break into positive territory. Price then congested and pulled back to yesterdayʼs close. Slightly breaking below the level. It quickly sprung back up and had a 4 Close Reversal at 10:50. This carried price dramatically higher for the rest of the morning.
There are three possible areas to enter a long trade here:
1. One tick above yesterdayʼs close via a resting stop order.
2. On pullback after Yum-Yum break.
3. On 4 Close Reversal at resumption of trend up.
My last post showed the short-term dollar strength. When we look at a longer time frame, we see the real picture. From itʼs high in 2001, the dollar is down over 25%. In this regard, the recent 10% rally isnʼt so significant. The dollar is now facing six year overhead resistance at 90. The bottom of this six year period is roughly 75. Should price break up through the 90 level, a box target, measured from 75 to 90, could push the dollar index up to 105. This could be a tough move for the dollar to make as there will be overhead resistance the entire way up.
Since July, the US dollar index has rallied from a low around 80 to over 89. A 10+ percent move up. The move up was preceded by a nice “Spring” in early July. This was preceded by a bigger spring in May, 2014 (not shown). Price rallied up above the previous pivot highs of June and formed a Line pattern. This was the spring board to a dramatic rally. An A-B-C reaction in October, presented another buying opportunity on the 4 Close Reversal.
5 Minute Bars, 24 Hours
The stock market “tanked” overnight. However, the weekly and daily trends are both up. Therefore, you have to look for buys. ES gave a great buy signal. Price formed a Head and Shoulders bottom in the firs 3 hours of trading. The Head and Shoulders are labelled. The right shoulder is extended into a “handle” formation.The breakout happens at 12:35 around 2045. The distance from the head to the neckline is the target distance for the projected move above the neckline. This is shown as green arrow. Price goes right to this level around 1257. Which is very close to the previous dayʼs close.
Weʼve talked about the “4 Close Reversal” pattern before. Like all reversal patterns in John Hillʼs 9 Patterns that Signal Trend Changes, they are especially strong around key levels on the chart.
This chart shows the ES contract during the October drop. Price broke down through the 200 day moving average. It had one day of follow through down. This day and the next both showed dramatic tails.
Tails below the candle body indicate buyers. Two tails in a row is called a “Tweezer Bottom”. This was the firs hint of a bottom in price.
The next day, price rallied. This rally carried ES above the highest close of the last four days – shown in the chart by the upper black line. The lower black line is the lowest close of the previous four days. The 4 days are numbered. Here could be a good place to take a “nibble” long. What is a “nibble”? A nibble is a small position with a tight stop.
The next day showed follow thru up. this day reversed both the 200 moving average and the previous pivot low. The low of the move proved to be “in”. Price continued to rally.