U.S. Pat. shares have extended their rally after US President Donald Trump said he would slow down rates on Mexico because a migration agreement was being arranged. This news has contributed to the exuberance of the market with regard to increased bets on a response to a succession of poor economic data. The prospect of lower interest rates, combined with the averted trade risk, helped drive stocks higher
The rose 0.5% yesterday, the fifth consecutive day of profit. This brought the benchmark to 2886.73 at the end – an increase of more than 16% since the start of the year – after reaching an intraday high of 2904.77. Nevertheless, we take various indications that this rebound will not last long.
Trump's recent threat to revive the specter of increased rates on Chinese exports to the US if President Xi Jinping does not meet him at the G-20 summit in Japan at the end of the month, the prices may be good highs. Moreover, technical analysis of the graphs suggests the possible development of a strong bearish pattern.
Technically, the price closed yesterday, after we had interrupted the level of 2,900 yesterday, as traders remembered the 5% decline that occurred when it approached this level on 16 May. Yesterday's trading pattern produced a shooting star, whose long higher shadow was drawn in unsuspecting bulls, food for bears.
A falling star is bearish at any time after a rally, but when it coincides with the resistance of the left shoulder, it confirms – and reinforces – the importance of this price level, with all the power that anticipation and interest packages have. But there's more.
The shooting star developed after a step. Although that may be enough, again the location on the map meant that it created the scenario for an evening star, in Japanese candlesticks, or an island reversal, in Western technical analysis.
The pattern contains three sessions. A head start, a widening gap – reinforcing the prospects for a continuous rally, attracting more bulls – and third, a decline that stops all bulls, encourages bears and attracts those who are undecided into the market.
If today's candle falls into Friday's long, green candle – with a falling opening that makes traders even more exciting because they lose more than their stop losses – we will receive a different, reliable bearish signal.
Trading Strategies
Conservative traders would wait to go long, either for a new record high or for a new set of falling peaks and troughs, as the price was positioned higher on Monday to Monday than the previous peak on 16 May, setting the trend confused.
Moderate traders can take a short position after the evening star is completed with today's candle below 2860 on a closure basis.
Aggressive traders can now have a shortage and see the rise of the future as a rare gift, rising against both fundamentals and technicals.
Trade sample
Listing: 2,900
Stop loss: 2,905
Risk: 5 points
Target: 2,885 – yesterday's closing price
Reward: 15 points
Risk Reward Ratio 1: 3
