The market on the daily chart has sold off for 8 days and is breaking below yesterday’s low. Yesterday is therefore a Low 1 bear flag.
Because it was a bull bar, it is a low probability sell signal bar. Also, the chart is just above the October 15 buy climax low. That is a magnet and therefore support. Consequently, traders expect buyers at and not far below yesterday’s low.
If there is a small reversal up today or tomorrow, the bulls would then have a micro double bottom. They would then expect a reversal up. That would be a higher low major trend reversal.
But the selloff was strong. If there is a reversal up, it will probably be minor, which means another leg in the trading range.
Consequently, over the next week, the might fall a little more and then bounce. Once it bounces, it will then probably test down again. A little down, a little up means mostly sideways for a few days.
The Forex market on the 5-minute chart sold off 30 pips overnight. By falling below yesterday’s low, it triggered a sell signal on the daily chart.
But instead of a strong selloff, it bounced and has been trading around yesterday’s low. This is not how a successful breakout typically looks. It increases the chance of another small day today.
So far, the bears have been selling. But the absence of a strong selloff indicates that they prefer to sell rallies and take quick profits. Also, because the selloff is not strong, the bulls will buy reversals up for scalps.
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