Autochartist

By, James A. Hyerczyk Besides the obvious rectangular and triangular patterns keeping the FTSE 100 in check since July, a shorter-term look at the market shows the formation of an inverse head and shoulders chart pattern. This pattern usually indicates the potential for a strong breakout to the upside. However, as a sign of just how bearish this market has become, this pattern is beginning to show signs of failure. The first shoulder was formed following the market’s failure at 5746.90 in late October. The subsequent break to 5075.20 did not change the trend to down, but offered a buying opportunity for traders looking for an optimistic solution to the sovereign debt crisis in the Euro Zone. To bearish traders, however, it represented another opportunity to short the market at a higher level. After the inverted head was formed at 5075.20, the index went on a strong rally, fueled by central bank intervention. As the index approached the previous top or right shoulder,...

By, James A. Hyerczyk After straddling the Autochartist Key Levels support level at 4134.00 for several 30-minute time periods, it looks as if the Australia200 (AUS200) index CFD has finally succumbed to selling pressure and is poised to break sharply. If downside momentum can continue then this index CFD will likely reach the Autochartist forecast price zone at 4111.19 to 4079.84 over the near-term. When using the Autochartist Key Levels trading tool to gauge the sentiment of a market, traders should be aware that although the signal is based on a simple trading premise, it is suggested that other conventional forms of technical analysis be applied so that one can gain clarity and trade with more conviction. It helps if one knows the dominate trend of the market, for example. In addition, traders should be aware of the position of one or more overbought/oversold oscillators. Applying other price indicators also helps as they sometimes form clusters with the identified key level. Finally,...

By, James A. Hyerczyk A third lower top near 749.50 helped to form the resistance line of an emerging triangle chart pattern on the US2000 chart. This triggered the start of a break that may turn into a completed chart pattern if downside momentum continues. Although the initial trend on this 1440-minute chart was up, the current weakness may be fueling a possible reversal trend change. The overall quality of the chart pattern is a slightly above average 6-bars. The initial trend which measures the strength of the trend prior to the chart pattern’s formation is rated a weak 1-bar. The solid 9-bar uniformity rating may be indicating the presence of equidistant tops and bottoms as well as a number of successful tests of the support and resistance levels. The clarity rating is determined by the amount of “spikes” and “gaps”, otherwise known as “market noise”. The 6-bar rating suggests that the clarity of the chart pattern is slightly above average. The triangle...

By, James A. Hyerczyk The evidence is in and it is official, the FTSE is rangebound, but depending on how one looks at it, it is setting up for either a prolonged sideways move or a range compression pattern followed by a volatile breakout. This is because the index is either forming a long rectangle or an almost symmetrical triangle chart pattern. A rectangular pattern will mean the index will trade with wide ranges. A triangular pattern will force the daily ranges to narrow, suppressing volatility until it breaks out. The rectangle is bounded by the July top at 6084.10 and the August bottom at 4791.00. This creates a mid-point or pivot price at 5437.55. On Thursday, the index traded on both sides of this level, indicating trader indecision. Since bottoming in August the market has used this horizontal line as resistance from early August to mid-October. From mid-October until mid-November this price was support. With the market basically trading at 50...

By, James A. Hyerczyk A successful test of slightly below 8378.04 by the Japanese 225 (JP225) index CFD led to the formation of a short-term support base. This helped finish an emerging channel down chart pattern on the 60-minute chart. Autochartist is projecting a possible rally from this low level, but since the initial trend was down, traders should watch for a possible reversal signal rather than the usual continuation move. The quality of the chart pattern is rated a slightly above average 6-bars. The initial trend rating, which measures the strength of the trend prior to the chart pattern’s formation is a below average 3-bars. The 7-bar uniformity rating means that the chart pattern contains a greater than average amount of equidistant tops and bottoms. The quality indicator looks for trading “spikes” and “gaps”. The solid 8-bar rating indicates the absence of such disruptive pattern phenomena. The channel down chart pattern is a trending pattern. The wide parallel lines created by the...

By, James A. Hyerczyk When the FTSE opened, all eyes were probably on a pair of potential support levels at 5353.55 and 5287.86. Tuesday’s weak close put the market in a position to test these two levels early, but it was going to be up to follow-through momentum to actually fuel a break down to these levels. Short-term oversold conditions probably led to the choppy two-sided trade early in the session, but that eventually gave way to a series of lower-highs and lower-lows which eventually drove the market to the low of the day at 5366.80. Based on the short-term range of 5075.20 to 5631.90, bearish traders were most likely trying to drive the index into 50% of this range at 5353.55. A failure to hold this level would have meant further downside action. The premature bottom indicates that selling pressure dried up, giving short traders an excuse to cover their positions while the crowd was waiting inside of the retracement zone. Combined...

By, James A. Hyerczyk Following a prolonged move to the downside in terms of price and time, the United Kingdom 100 (UK100) index CFD reached an oversold level, triggering a quick turnaround. The channel down chart pattern that formed on the 30-minute chart with a top at the resistance level at 5470.24 became an emerging pattern when the market made its final bottom on the support level at 5366.80. The quality of the chart pattern is 6-bars. The 8-bar initial trend rating is a solid indication that the market could move higher especially since Autochartist has identified this as a continuation move. The purpose of the initial trend is to measure the strength of the trend prior to the formation of the pattern. The uniformity indicator looks for equidistant tops and bottoms as well as measuring the strength of the touches of the support and resistance levels. This indicator is rated an average 5-bars. The clarity indicator is also rated 5-bars. This...

By, James A. Hyerczyk A late session sell-off thrust the Australian 200 (AUS200) through the support level of an almost perfectly drawn descending triangle chart pattern, setting up the index CFD for a potential break into the Autochartist forecast price zone at 4133.22 to 4085.22. The quality of the chart pattern is an above average 6-bars. The initial trend which measures the strength of the market prior to the formation of the chart pattern is rated a slightly below average 4-bars. The uniformity indicator is the highest rated quality indicator. It looks for equidistant tops and bottoms as well as measuring the number of touches of support and resistance. Its 9-bar rating suggested that support was a key area to watch so the breakdown through it carries some weight. The descending triangle chart pattern is a non-trending pattern. Its support line is usually relatively flat, but when combined with a down-sloping resistance line, creates an apex that almost pinpoints the next breakout. It...

By, James A. Hyerczyk Traders tried to boost the FTSE 100 index on Tuesday, but failed to attract enough buyers to turn the main trend to up on even the intra-day charts. This is a sign that buyers are scarce and that short-sellers have not been frightened enough to cover their positions. Since launching an extraordinary rally two weeks ago, the FTSE has gone into what appears to be a distributive mode. This is a chart pattern that suggests the systematic liquidation of long positions and the refreshing of short-positions. As this pattern develops, bottoms and tops begin to move lower. This often leads to an acceleration to the downside. As the FTSE enters the “cascading” section of the chart pattern, downside targets are becoming more evident. Based on the last rally from 5075.20 to 5631.90, the next move to the downside could mean a correction into the 50% retracement price at 5353.55 to the 61.8% retracement level at 5287.86. There may be...

By, James A. Hyerczyk Pressure is once again mounting on the global stock indices as traders appear to have thrown in the towel on the long-side of the equation. After making its final top at 5631.90 late last week, the index has embarked on a series of lower-tops and lower-bottoms. This type of formation often leads to a sharper break that looks like a cascade. The current sideways action is indicative of a distributive chart pattern. This is an indication that bearish traders have gained control and are building short positions. Based on the last rally from 5075.20 to 5631.90, traders could be looking for the start of a retracement to 5335.55 to 5287.86. A trade into this range will mean that the entire massive rally from almost two weeks ago has been erased. The recent string of low volume days may also be a sign that long traders are leaving the market. With short-traders in control and long traders being eased out,...