Daily Indices Update: US2000 |
By, James A. Hyerczyk
The US2000 index CFD broke through the Autochartist Key Levels support level, triggering the start of a potential break into the forecast price zone at 697.52 to 659.22. Traders should note that on the way up, the market accelerated through this same price level at 725.10 on the 60-minute chart. The lack of follow-through to the upside and the subsequent sideways action indicates a distributive pattern may have been taking place. This is a particularly bearish pattern and it often leads to an acceleration to the downside as traders scramble to liquidate their long positions.
When trading a breakout pattern like the one suggested by Autochartist Key Levels, a trader has to always be aware of momentum and volatility. Both of these indicators are necessary to drive the market lower when the market breaks through support. This usually means that tight stop loss protection will be necessary. Without volatility to push prices lower, a market will often linger around the breakout level. If one wants the market to move lower then it doesn’t make sense to hang on to a trade that has crossed back over to the bullish side of the support level. It is more important to protect your trading capital than to hold on to a position until it moves in your direction.
Besides the Autochartist forecast price levels, traders can also use retracement zones to set potential profit targets. Even better, sometimes these two target zones overlap, making them more important. Based on the rally from 664.00 to 750.00, a retracement zone has been created at 707.00 to 696.85. This zone overlaps the upper portion of the Autochartist forecast zone, creating a confluence of levels which could prove to be solid support when tested.
About the author: Autochartist
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