Last week on January 26, new highs were made, but on much narrower range and lighter volume. The next day continued higher on lighter volume (1.554 million contracts) and narrowed into an NR7 day. This began to look like dullness at the top of the rally. We also see SOT at the highs. Buyers appear exhausted, giving a chance for sellers seen on January 19th an opportunity to attempt another round of selling. This came on Friday. Triggered by the unrest in Egypt, we see a large increase in range and volume. It’s a distinct change in behavior from recent reactions. We are likely to see more downside trading near term.
Trading for Next Week
Coming into Monday, we are oversold from Friday’s action. Although we can expect two-way trading on Monday, given the large move down, we can expect further downside follow-through before price begins to trade back and forth to consolidate the new price lows. As I write this, the low of the 20th was broken in the Sunday evening Golbex session.
Any rally up on early Monday morning will offer a shorting opportunity. Look for selling to come in on a rally into the 1268 – 1270 area or, if the market trades higher overnight, the 1278-1280 area (morning session only).
The next level down is the 1258 area. There was a fair amount of trading and testing of that level earlier; and so we can look for price to find support in this area. If the market fails to attract buyers at this level, then 1247-49 would be the next level I would look to for some buying to enter.
Don’t use these levels as automatic buy and sell points, please! You must watch the price action and volume around these levels to determine the level of supply and demand via Wyckoff principles. Be mindful in your trading. Volatility has increased, so price can move right through support and resistance levels and surprize many traders.
Reading the market the Wyckoff Way like this can be learned via my Wyckoff in the Modern Markets, Parts 1 & 2 training videos. You can learn about the details of this Wyckoff training here: Part 1 and Part 2 Also, on February 10th, I will begin a new weekly training program called Deep Practice. This is designed to help traders build and integrate chart reading skills via deliberate practice. Details are available here: Deep Practice with Dr. Gary
Trade Mindfully,
Dr. Gary
Leave a Reply