Sunday, September 6, 2009
J200, End of the day chart
Let’s take a look at daily charts - J200 or Top 40:
First one is from February 2009 till Friday, September 4th, 2009. It is easy to notice that there is strong and obvious trend upwards from low that was made on March 3rd, 2009. Two black lines are parallel, making channel that was tested twice at the bottom and twice at the top. Also, we can see as well that there are some negative divergences that were developed before recent drop which was 7 days long with 6 red days and 1 green day. In the mean-time some hidden divergences developed on Stochastic and RSI. (Hidden divergences are when indicator makes lower low and price makes lower high.) Both of them are shown with green lines, with one that was on August 17th, 2009 and another that was very recent. These hidden divergences usually point towards another upswing on Top40 in weeks to come.
The other chart shows bigger picture for Top40. Starting from mid 2005, we see strong move up; then strong move down which is followed with trend that started in March 2009. This chart is telling us why market is so reluctant to go higher: There is a massive resistance around 22700-23000 (thick red line) which was tested 11-12 times from bottom and top (from December 2006) and it is coming into play again.
Looking as first chart, it is clear that area around mentioned line was tested so many times in last few days.
Of course, the most important is to see if that trend line gets broken. If it does, market will go up strongly and get to 24500-25000 area fast. However, if market decides not to go over resistance, then we will have big pull back that can take us all the way down to 21000.
In both cases, J200 will resume its direction shortly.
Trade with trend!