From Craig Cobb at Trade with Precision:
The talk of the town currently are the global equity and index markets which are seeing major coverage by being front page news. Once again, the news is after the fact as many of these markets have been in downtrends for months now.
So the main stream media are crying sob stories and carnage while many in the trading world (perhaps prematurely) are saying that based on last night’s US buying into the market close that this could be the ‘bottom’. Personally I think that these people yelling and screaming about the markets are after attention and are probably trying to sell something; but that’s just my opinion.
So what do I do in times like these? What I always do! That is to go directly to the chart. The bottom line is that the markets look bearish and after a quick look I like the Nikkei the most. Looking at the daily chart below, the daily trend is certainly down with both the MACD and RSI indicators confirming this bearish stance and are both convergent showing no signs of this trend weakening.
Looking at this daily chart, zoomed out below, you will notice that there is a strong level at 16,585 (roughly). Price is currently at this level right now and we see that time and time again that an old support level will most often act as resistance when it is retested from beneath.
Now from the daily to the 4 hour chart. This is where my interest for a potential trade lies. There is a strong trend once again, the moving averages are in the correct order and price has now pulled back up into the sell zone (the area between the 10 and 20 period moving averages). Added to this a 50% Fibonacci level is clustering with the daily support and resistance level of 16,585. These multiple factors all point to a potential fall from the current price and for the Nikkei to continue its downtrend.
So all is set, the price is right, the trend is down and the fib and indicators are telling me that this could be the place for price to roll back over. So will I be getting short now? No! As I have come to understand it, trading isn’t just about buying or selling in the right area, it’s about timing. Patience is what is required right now and patience is what I have buckets of. I plan to wait and see if I get a small bearish candle in this area. If this sets up, then I will take action to look to join this trend lower.
Remember, when it comes to the press and media/trading pundits … I don’t listen, I won’t listen! I choose to follow my own rules as I always have and always will.