Friday saw prices close below the upward sloping neckline confirming a bearish head and shoulders top pattern. The target is ~ 16.134. However, there is stiff support coming up between 17.514 and 16.955. This zone contains its monthly pivot, its 34 EMA wave, and a fib cluster containing symmetry. I wouldn't be surprised to see prices stall in this zone, retest the neckline, and then move lower. Longer term, this market remains bullish if it holds 16.45. But this market is definitely a bit overbought and has already seen a bearish crossover on the MACD. I think this pattern has a good chance of success.
There's a possible head and shoulders top forming in the September futures contract. The left shoulder was formed on 5/20, the head was formed on 6/2, and a possible right shoulder was formed on 6/10. Now all we need to confirm this pattern is a close below the neckline. The height of the pattern is ~ 1.58. Therefore, the target will be 1.58 less the neckline break. If it breaks out today, then the target would be ~ 16.134.
How do we trade it? You can be aggressive and enter as the neckline gets broken. The risk with this entry is that the pattern fails confirmation and bounces higher. The more conservative approach is to wait for confirmation of the pattern. Then, enter on a pullback to the neckline breakout. The risk with this entry is that the market never pulls back. Your stop can either be above the right shoulder @ 18.56. Or you can place it above the downward sloping trend line. Today's level would be ~ 18.429.
This patterns obstacles to its target include the 34 EMA wave, which often serves as support on trending markets. If this area doesn't hold, then its 100 DMA and 50 DMA stand in the targets way.
September futures reached a high of 7510 yesterday, which was just inside the lower end of my resistance zone. There's bearish action showing up on the 240M chart, which indicates lower price action. The first downside support zone is between 7350 and 7296. Inside this zone there's the monthly R1, the 100 DMA, the 34 EMA H, along with four Fib symmetry projections. If price action reaches this zone and it holds, then I will look for more clues as to which way prices will go.
The Dollar Index has been in a down trend since topping out on March 19th. Since then, this market has made 3 significant measured moves (MM). The first MM, which is the dominant one, had a neutral retracement. This indicates the start of a strong down trend. However, it had significant left-handed skewing. The skewing is an indicator of momentum and a ratio of 5:38 is extremely weak. This puts a damper on the bearish retracement.
The next 2 MM's were located inside the dominant one. They both had deep retracements, which signals a weakening down trend. The 2nd MM also had extreme left-handed skewing with ratio of 8:23. All together this shows a down trend that is weakening and looking for a bottom. We can use extreme fib extensions to create a possible support zone. Utilizing the fib extensions of the dominant MM and it's two supporting MM's, I have created the first area to watch for a low. It's between 95.38 and 92.54. If the market trades inside this zone, then I will look for more clues to a possible bottom. If the market does bottom inside this zone, then I would expect a significant bounce higher.
The Canadian Dollar has been rising since it's March 19th low. Since that time it has made four measured moves (MM).
The dominant MM had a neutral retracement with extreme 6:24 left-handed skewing.
The 2nd MM had deep retracement with 5:12 left-handed skewing.
The 3rd MM had deep retracement with 4:3 right-handed skewing.
The 4th MM had shallow retracement with 3:1 right-handed skewing.
These MM retracements and skewing can give us some insight on the strength of the up trend. Strong trends have neutral or shallow retracements with right-handed skewing. Weak trends have medium deep or worse retracements with left-handed skewing. This up trend started with a neutral retracement, which is strong. However, it had left-handed skewing with a 1:4 ratio. This shows weak momentum. The next two MM's had deep retracements, which signals a weakening up trend. It's not surprising giving the skewing on the dominant MM. Finally, the final MM showed some strength with a bullish retracement and bullish skewing. This helped push the market higher on the 26th of May, creating the breakout candle of the dominant MM. Now that we know how this market has rallied, we can determine possible resistance using Fib clusters of the four MM's.
The first major area of potential resistance I see is between 74875 and 76146. This area contains the dominant MM's 261 extension, the 2nd MM's 261 extension, the 3rd MM's 361 extension, and the 4th MM's 461 extension. In addition to these fib clusters, we have the 78.60 retracement level of the 12-31-19 high and the 3-19-20 low and the YTD POC level @ 7528. Finally, we have a VSCORE approaching it's mean. All these together should create significant upside resistance. If prices reach this zone and stall out, then I would expect a correction back down to a least 72245. This is the swing high of the dominant MM. I will continue to monitor this market as it approaches my resistance zone and give more updates if warranted.