Another False Bearish Breakout on Global Indices
Buyers did it again, traders were lured into a short position after a very handsome bearish pattern. This pattern was head and shoulders and was being drawn for the vast majority of the previous week. Formation ended with a breakout of the neckline, which in theory, gave a sell signal on both: DAX and SP500. Surprisingly (or not), Friday brought us a sharp reversal, which left sellers on loss and facing a bigger rise, which is pretty common after a false sell signal.
On Dax, sellers gave up on Friday morning, when the price met a crucial horizontal support coming from the end of June and the beginning of July. Price went significantly higher denying the head and shoulders pattern and giving us a flag formation. This is important as a flag formation actually gives us a proper buy signal. The sentiment here is definitely positive.
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Pretty much same thing is happening on SP500, so you can copy-paste the paragraph above. Maybe the flag from DAX is a wedge on SP500 but the outcome and the sentiment are the same. New mid-term highs are on the eyesight.
Let’s close this analysis with the USDCAD, where the price is drawing a bigger head and shoulders pattern, which has a potential to end the bullish correction started in June. As for the neckline, we are talking here about the 1.348. Breakout of this support will lead the price towards the one on 1.333 which looks pretty important here.
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