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Ride the Bear Channel
09/17/2019 9:24 am EST
The long-term bear channel continues to provide two-way trades for those technicians willing to follow it, reports Al Brooks.
The EURUSD chart has a weak reversal up from the bottom of its two-year bear channel on the weekly chart. Last week the euro formed a micro double bottom on its weekly chart. This is occurring at the bottom of the bear channel that began in November 2017 (see chart below). It is also at the bottom of a bear channel that began this June.
However, the bull bodies for the past two weeks were small. Last week is therefore not an especially strong buy signal bar for this week. The bulls need a strong reversal up over the next couple weeks before traders will conclude that the two-month selloff has ended.
But even if the bulls get their rally, traders know that every reversal up over the past year failed and led to a reversal down after a few weeks. There is no reason to believe that this bottom attempt will be different.
2 Double top bear flags
There are measured move targets below. Measured move targets, like all support, are magnets and they draw the market to them. The July/September 2018 double top and the March/June 2019 double top both project down to just above 1.08. Additionally, the gap above the April 21, 2017 high of 1.0777 is also a magnet below.
With three magnets near one another and only about 100 pips below the September low, the bear channel will probably continue down. This is true even if there is a 200- to 300-pip rally up to the Aug. 6 or Aug. 26 lower highs that precedes it.
The bulls need a strong break above the June 25 major lower high of 1.1413 before traders will begin to wonder if the bear trend has ended. Without that, traders will continue to believe that the sequence of lower highs and lows will continue.
Traders can see the end of the day bar-by-bar price action report by signing up for free at BrooksPriceAction.com. I talk about the detailed E-mini price action real-time throughout the day in the BrooksPriceAction.com trading room. We offer a two-day free trial.
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