We cannot dispute that the long term projection shows that buyers are in charge. That is correct. Even if we decide to fade the main trend, we shall be putting our capital at risk and that is why I don’t always recommend such trades unless there are compelling reasons to.
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A single glance at last week’s candlestick shows that buy pressure as hinted by week ending January 22 candlestick wasn’t followed through. Instead, buyers pushed prices above the 2nd Fibonacci extension level at $23.
From previous analysis, we had projected price action to confirm bears and probably trend within the 1st and 2nd Fibonacci extension levels but of course that did not happen.
Now, is LSK recovery at the face of strong bears significant? In my view I would say yes. Fact is, short-to- medium term price action anchors on this week’s close.
In the daily chart, a potential head and shoulder formation would have been completed if prices closed at or around $14.
What we are seeing instead is a retest of the middle BB and resistance at the neck line as marked by $25. If anything, our bear projection would be cancelled if and only if prices close above the 38.2% Fibonacci retracement level at $27.
Figure 3: Bull Break out trade
First, we should be relieved that there was a bull break out above the main resistance trend line in our entry chart. Secondly, after that happened, price action is trading within a break out strategy with the second phase-the retest complete.
Therefore if bulls are to wade their way through this resistance zone bounded by the neck line at $25 and previous resistance, then we need the middle BB to hold in the coming sessions.
I will recommend buys if prices close above January 28 highs of $24.7.