The technical analysis trickle continues. Next up, following out earlier identification of a few hooks and technical plays in the Hang Seng Index, is a wider look at some other very highly traded assets. Lets start with the biggest of them all:
The trend lines, especially the upper, will become clear a bit later. Trust me, I have not fallen for the “now is a data point” fallacy. What we have here though is:
- MACD confirmatory cross in bullish trend territory: long!
- All MA’s left behind.
- ADX/DMI trend pick-up, if ever so weak.
- Counterargument: falling Bollinger Bandwidth, indicating a consolidation might occur and it will be very important to see the details of the continued price action for the coming week.
Not very special fare, but I will attempt to put this in longer-term context:
Five-year frame of the same situation, with the candles being weekly candles. We can still see the previously drawn formations in the 2012 part of the chart, with the lower descending trend line being the same one seen in the chart above. Pretty nice, huh? We can draw (poorly) the middle line though the prior two market bottoms, averaging around 600 pips below the line, which is surprisingly enough the span to the uppermost falling trendline. We thus basically have these two week trend lines with 600 point “error” approaching, at the very least indicating a much stronger case for volatility of at least 600 pips. Where now to?
Price action in each of the falls has been less intensive. Thus, the falls are less sustained, and this makes intuitive sense given the amount of QE undertaken by the Fed. The green line is the 26-week EMA and we climbed above with a wick rejection, making it look all the better. Normally, horizontal lines are stronger, but this gets muddied given questions of the validity of the bottom line and its uncertainty. Still, the descending line we are running up against is extremely important for price action in the longer run, and if there is a trend higher in the Euro, this would be the best time to initiate it. After studying the patterns at the bottom of the exchange rate as well, the current pattern is similar, yet even less forceful (albeit longer-lasting) on the downside correction just before the massive rally starts.
Are traders buying into the “Europe is fixed and there is no fiscal cliff” idea while still being wary of any strong negative shocks and not going all-in? It does look very interesting from a technical standpoint either way!
Still, we ought to proceed. Next on the menu:
Nikkei 225 daily candles:
Hook pattern in the box, price above Bollinger Bands, trend channel, and an absolutely beautiful pin bar rejection to finish the hook with! Beautiful! Notice the rejection of the upper BB by price which has been fairly consistent, the increasing three-month SMA and also the expansion of the lower BB, indicating the force of the move. 21/63 EMA divergence keeps growing, also a good sign for further juice in the rally.
What this chart does not show so well is what price of the Nikkei 225 one could potentially target. And that’s why I include the following:
What is really interesting about the upper line – currently running at around 9 750 and allowing us to target 9 700 – is that it has around 5 years of price action… from 15 to 10 years ago as well as the last 3 years! The market crash of the early 2000’s dragged it down below trend, but here it is once again proving to be highly relevant with three remarkably clean tests! The lower trend line has been continuously tested lately, but much shorter relevance, obviously. Testing 9 700 would allow it to challenge 10 900 again, and after that a serious look at the later price action will be very important. Suffice to say, the Japanese December 16th election just became very interesting from a technical standpoint!
Short term leaving of the trend sets up the 9 700 cross, and then we are back to the game of challenging peaks with the volume inflow. Very interesting picture, I just hope the yen won’t act too strongly to spoil the party…