The index bounced back from the low of RSI 50 and had a short 3 day run-up to retrace its previous support-turned-resistance line. The last 2 trading days shows us a not so good sign as the last 2 days had sell downs accompanied with larger value turnover relative to the first 3 days of trading. A negative/bearish divergence can also be seen between the RSI and the index, where the index rallied higher but failed to create a higher peak for the RSI. Expect that by next week, this bearishness would continue.
Looking at the daily chart, it looks like either a double top or a head-and-shoulder formation is starting to emerge from the picture. Either way, its neckline and support is around the level of 4180-4200. If the index moves lower than that support level, this might be a confirmation of the double top or head and shoulder formation, both of which has a target level of around 4050-4000.
Although the double top or head-and-shoulder formations on the daily chart are bearish formations, there is a possibility that this could be a blessing in disguise. Looking at weekly chart, we can see that an inverse head-and-shoulder formation is also starting to emerge. If the breakdown of the double-top/head-and-shoulder formation on the daily chart does materialize, this may contribute to the weekly chart forming the right shoulder of the inverse head-and-shoulder formation, giving higher possibility for the continuation of the upward trend since last year. The formation of the right shoulder on the weekly chart would take anywhere from 2-4 weeks to materialize so don’t bet yet on this happening immediately. For the coming weeks it would be best to keep liquid and watch for buying opportunities near support level of 4050-4000.
No comments:
Post a Comment