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Thursday, March 28, 2024

IT’S ALL ABOUT LOWER HIGHS AND PULLBACK OFF LOWS PATTERNS

IT’S ALL ABOUT LOWER HIGHS AND PULLBACK OFF LOWS PATTERNS

Courtesy of David Grandey at All About Trends

As you can see Friday the indexes stopped cold on the 61.8% fibonacci level after an options expiration vertical assault up.

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On Monday, the market may rise to fill the gap created in January and to retest that resistance level to see how it acts should it get there. Seeing as how it’s overhead supply it may act as a ceiling and that is exactly what we want to see should that occur. But on top of that those red lines in the charts also serve another purpose besides a gap fill and resistance and that is because those red lines are 78.6% Fibonacci levels. What’s great about that is you have confluence at those levels with multiple technical pieces of information that we chartists can sink our teeth into.

Should we get the Monday program trading melt up to those levels and stall, the next week or two then we really want to be on the lookout for a breakdown in the market. By the same token if we can pullback and not really give it up to the downside the computers could push us to a retest of the highs which really wouldn’t be a big deal as it would then be a double top on most likely negative divergence. A good example of what that would look like can be found in a current chart of the XOI shown below.

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We’ll find out soon enough if we are going to get rolling on the downside for the next leg down of this correction soon enough. First we need to get through melt up Monday and see what transpires at the 78.6% fibonacci level as well as that overhead supply. Over the next two weeks we really need to be on our toes and pay attention as odds favor a big move coming and it’s setting up to NOT be on the long side.

Pullback Off Lows or POL for short.

Let’s talk Charting 101 for a moment. Specifically what is an uptrend? When viewing a chart an uptrend, it looks like the diagram below. Higher highs and higher lows.

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When does an uptrend no longer become an uptrend? Simple when you no longer have a higher high take place and when that next step in the sequence of higher highs turns into a 1st lower high or even a double top if you will. It’s a change in its sequence of higher highs and higher lows. It can be no other way. Below is an example.

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Right now, we are going to find out real soon IF we start the 1st lower highs sequence. In many indexes and individual names we’ve already had the first potential shot across the bow in the form of major uptrend breaks to the downside as shown in many of our examples. Since those initial breaks to the downside, many names are sporting snapback rallies, should those snapback rallies rollover to the downside it’s then all about POL’s

The classic downtrend set up is the Pullback Off Lows pattern (POL). 

Pullbacks Off Lows — POL’s

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As you can clearly see this issue is locked in a downtrend. However within that downtrend you can also see a trend within the overall trend that is mini up trends (as shown by the pink lines). Those mini up trends are commonly referred to as Pullbacks Off Lows or POL’s for short. 

A break of the pink line to the downside is your opportunity to initiate a short-sell trade.

To learn more, sign up for our free newsletter at www.allabouttrends.net and receive our free report – “How To Outperform 90% Of Wall Street With Just $500 A Week.”

 

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