The timid break to the upside of the box range on the daily chart (orange rectangle, Image 2) has not produced the expected results for the bulls.
In fact, it took just one session (yesterday”s candle) for the bears to bring the price back within the aforementioned price zone.
An important role has been played by the 11th May resistance level settled by the dark cloud cover at 5430.
Considering the market’s inability to continue decisively beyond the resistance (convergence of candles), this could lead in the short term to very significant retracement downwards. The stochastic divergence highlighted from mid-April to date, in addition to a the change of the ADX slope, are more compelling signs the bull are running out of breath.
For a daily close below the 5300 level (the 23.6 Fibonacci level) – the first real support of the last two weeks – the next small areas of interest are all located between 38.2 and the 50% retracement of the last leg (green rectangles on Image 2).
As you can see in this 2nd image, a new way to view the levels of interest (possible target and reverse zones) has been introduced.
I’ve preferred to minimize the amount of indicators on Image 1 in order to make the reading of the graph as simple and immediate as possible. I also decided to introduce a different color approach, a kind of “heat” chart (Image 2) where the colors are associated with a S/R on different time frames, the larger the TF, the stronger and more important are the level.
RED = Monthly
ORANGE = Weekly
YELLOW = Daily
GREEN = 4H
The chart is not built based only on lines identifying the swing high/low tested for 2+ times, but rather by a scrupulous analysis based on a Multi Time Frame (MTF) perspective of the main and most reliable candle patterns. The effectiveness of the method allows, in some cases, for us to be able to uncover and locate areas of rejection that are hidden to the chart we are using for the mid to long term analysis in advance.
Any comments and suggestions below are very welcome.