Sell Signal Presented on US Dollar Daily Chart

02/11/2010 12:01 am EST

Focus: FOREX

Corey Rosenbloom

Founder and President, Afraid to Trade

After completing a perfect bull flag (in a pure textbook example) as expected, the US dollar index is now forming a bearish sell signal at the target of $80.50, which is worth our attention.

Pardon the purposeful alliteration, but let’s look at the daily dollar doji sell signal:


Click to Enlarge

The Bull flag target has long been the $80.50 level, and now we’re seeing a short-term sell signal in the form of a doji candle at the upper Bollinger band on the daily chart.

To make matters worse (or, to confirm the signal), today formed a strong bearish selloff, which now places the candle formation to resemble an “evening doji star” three-candle pattern.

It’s often the case to see price find unexpected resistance (meaning there are no moving averages or Fibonacci retracements there) at a price pattern (bull flag) projection target.

That makes sense. If a bull flag had an unlimited target, investors or traders would keep holding long instead of taking their profits at the expected target (sometimes creating via self-fulfilling prophesy the down move expected).

Whatever the case, it’s worth noting that the dollar is likely in a sell swing short-term that could take price to challenge $79.00 or lower.

By Corey Rosenbloom of AfraidToTrade.com

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