Eyeing Strong Resistance Ahead

In our report last weekend, we wrote:  "Internals are bearish on all timeframes… And [our] Odds [Indicator] is short as well. A difficult and volatile week for trading as price just thrashed about in a wide range. Our trading system is currently short and we also exited our LT longs near 4700. Looking at price and internals, it does look like we need lower before finding a lasting bottom. At the moment, I do not have a specific area in mind but buy signals can start showing up as early as 4550 depending on how we get there."

What actually happened is that price did test 4550 and lower before taking off higher.

After setting the lows on Monday, we had a strong rally through the rest of the week. This improved internals on the shorter timeframes pushing a few of our indicators to the buy side. However, long-term internal indicators remain bearish and require more strength and time before they can go to the buy side. We also did not get an Odds Indicator buy signal at the lows, so the extent/sustainability of this rally remains a question mark in my mind. It also looks like more Odds sell signals are going to show up at higher prices. 

But short-term internal indicators going to buys means that this current move does have higher to go -- how high is the question.  What I think right now is that we may grind higher toward somewhere in the 4780/4850 range (wide range but will fine tune as we get closer), and if so we will likely face strong resistance/supply in that range setting up a top for lower targets below the recent lows.

For now though, our system is partially long and we will continue to hold that until the indicators suggest otherwise.  

Grey zone resistance is at 4728–43 and then at 4767-81. Support is at 4705-4690, 4665-56 and then at 4626-15.

For Monday, daily pivot is at 4710.5.  Resistance R1 is at 4737 and R2 at 4758. Support S1 is at 4690 and S2 at 4664.

All the best to your trading week ahead.

Princely Mathew hosts The Smart Money premium service at ElliottWaveTrader.