tried to reverse their biggest daily decline since February 2018 due to the deteriorating global spread of coronavirus. However, the recovery lacked the stamina to go against a seemingly deteriorating mood among investors and it fell even further.
But even if the future turns around again or their underlying meters pick up again, it is quite possible that it may be too late and it simply appears to be the trading pattern of a market top.
Although yesterday's falling gap had no technical impact on itself, as it was a Common of Area Gap, the fact that it fell above 3,300 levels below the January 22 peak was the first current sign that the current upward trend may not be sustainable. The second sign that is now relevant was when the price crossed below its upward line from the lowest of 3 October – which was reinforced with the 50 DMA.
We emphasize "current" and "currently" because we have reported bearish behavior several times, dating back to at least the end of January, because the RSI and MACD have produced negative differences.
Equities can very well re-test the 3,300 levels – because institutions are repelling in a measured way to feed a rush that looks like a bargain hunt, but which may prove to be a bull trap.
Trading Strategies
Conservative traders would wait for a return to the 3,300 levels, which would then be drowned out by supply, pushing it below the neckline – the lows since the last day of 2019 at the 3,200 levels. Wait for a minimum of 3% penetration to reduce the chance of a bear fall, a return movement to retest the neckline and then short.
Moderate traders would wait for the expected death cat to bounce to 3,300 and short.
Aggressive traders are likely to risk a long position after yesterday's panic sale that was stopped on the support of the lows since December 31.
Trade sample
Listing: 3,225
Stop loss: 3,210
Risk: 15 points
Target: 3,270
Reward: 45 points
Risk: reward ratio: 1: 3
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