Technical Analysis: Weekly Market Strategy
This is the next installment of a weekly, exclusive, series of technical analyses that DeFinity is proud to share with its community.
The analysis is completed by renowned, experienced financial analyst and successful global podcaster, Paul Rodriguez.
Paul Rodriguez lectured at the City University in London on the subject of Technical Analysis whilst working as an award winning analyst at NatWest Global Financial Markets (Now RBS) in the 1990’s, pioneering and promoting the education and use of technical analysis to City professionals and private investors. Paul set up Think Trading to continue that education and consultancy having appeared frequently on financial news channels seeking his views. He set up the State of The Markets Podcast with fund Manager Tim Price three years ago, which consistently tops the top 50 UK business podcasts and has a global audience. He provides bespoke research and consultancy to market-leading firms.
Our long-term targets at 100 have now been hit in the US dollar index and prospects for a consolidation have been increased. Yield pressure remains to the upside and again a consolidation/retracement is not unwarranted having hit long-term objectives at 2.49%. Bunds are close to a major fibonacci support level where a large reaction should be monitored. However, with inflation accelerating, we see 3.24% as the next major objective in US 10-year yields.
Soft commodities look set for another move higher with sugar, soybeans, corn, and wheat all gearing up for another major squeeze. Natural gas looks set for another leg higher and the lack of correction in oil (a short-term stop is still possible in the context of a larger bull trend) makes it less likely we will see inflationary pressures ease anytime soon.
Crypto assets stalled last week, ETH found support at the highlighted 2951, but BTC extended losses through 42k. This is not a terminal situation for the medium-term bull trend, but prices need to recover from here else the risk will begin to revert to the downside. The sentiment is bearish, but we continue to hold a bullish bias until the price action justifies a change.
We have now hit long-term targets at 100 and, as discussed last week, a consolidation phase is warranted from this key psychological level. Short-term support is at 99.45 with extended support between 97.51/71. After this consolidation, the next target is at 102.98, being a full 100% retracement of the March 2020 high to the Jan 2021 low of 89.81. A break of the main upward trendline would end the bull trend — currently at 96.00.
US 10 Year Yields
We maintain our bullish bias as acceleration was noted from previous documents, but a consolidation/correction is becoming more compelling. Post correction, the next target is at 3.25% and as commodities continue to squeeze, it becomes clear that the Fed is behind the curve. A two-week drop below 2.49% would suggest a deeper correction, but the upward path is likely to remain for 2022.
Bunds have fallen a long way since the initial signal at 175.77 and we are now approaching a major fibonacci retracement support at 154.20. Whilst an extension through this level is possible, a consolidation is not unwarranted given the pace of decline and distance from the main downward trendline. 161.81 is a pivotal level and should act as resistance on any rebound. The bias will stay bearish unless a reversal pattern is evident or a break of the main downward trendline occurs.
Chinese stocks have consolidated since March at which time we switched from bearish to tentatively bullish. The price action has continued to draw out a potential basing formation which, if completed by a two-day close over 14,189, implies a squeeze back towards 15,281 (main trendline) — note key resistance at 14,512 in between. With the main downward trendline and moving averages still in a downward trend, caution still remains. Any break of 13,040 would indicate the downward trend is resuming, negating the reversal pattern.
The price action for the majority of 2022 has been sideways, but this is a normal part of a potential basing process. If 16.00 support can hold for a couple of weeks longer, the potential for a rally through 24.10 increases, completing a bullish ‘head and shoulders’ reversal pattern with implications for a move to 36 into late June. The current position is crucial as any decline below 15.00 would negate the pattern and risk a continuation of the downward trend, most likely with the majors in synchronization.
We remain tentatively bullish here as key support at 2951 has held and the price action still looks corrective from the resistance previously highlighted at 3574 and the 200-day moving average. It is important that the rally starts soon as a break of 2951 would place the main yellow support line in the crosshairs, that being the last defense for a major correction. If 3324 can be breached this week, our bullish targets at 4030 will increase in probability. This is an important zone for ETH and cryptocurrencies in general.
The break of 42,000 does not preclude a strong rally in BTC, but has reduced the probability as prices have extended further in both time and price for an interim retracement. In this zone, we are cautious, as the main support line at 38,013 is close, and extending below this line would not be a good sign. Despite the loss of momentum, the correction is still within acceptable parameters for a broader consolidation so we will maintain a positive bias until negated. Closing back over 42,000 would be a good start, but retaking 45,479 would imply an extension towards 50,000. We are monitoring this current move closely as it could determine the next 15k point move.
This report is superficial in nature and may contain errors. No warranty is given to the accuracy of the data or text and any reader must understand that it should not in anyway form part of an investment process — that is reserved for that individual/business and an investment professional. No positions should be taken, exited or otherwise considered on the basis of this research. This is a condition of reading this document. The main function is of education into how different chart patterns might indicate a future trend (or lack thereof) and not for the purposes of speculation or investment.
Transcribed to Medium
Original Technical Analysis provided by
Paul Rodriguez — ThinkTrading.com
DeFinity Crypto Market Anomaly Detection is live!
DeFinity token holders can now gain free & exclusive access to deep learning AI-powered risk management insights ordinarily reserved for top tier institutional investors, via the clarity app.
Stay up to date with DeFinity:
· Telegram Official Community — https://t.me/DeFinity_Community
· Telegram Announcements — https://t.me/DeFinity_ANN
· Medium — https://medium.com/definity-network
· LinkedIn — https://www.linkedin.com/company/definitynetwork
· Twitter — https://twitter.com/definitynetwork