Wednesday 5 May 2010
The daily chart was printed at 9:30 a.m., CST, to provide a quick look at
what may be developing. Since the sell recommendation on Friday, price
has reached an oversold condition. Bear in mind that oversold is a relative
term, and it can become more oversold. It is just an indication to watch
market activity for a possible reaction.
For full disclosure, we covered short positions at 1164, pre-opening when
price was nearing the oversold area. Price dropped another 1,000 tics, so
it shows how the condition is relative. As we write, price has rallied to 1169.
What we expect from here is a rally to retest the breakdown level from
yesterday. The upside to an expected rally is the 1186 area, which also
happens to be the day session opening. If the rally is weak, it will be an
opportunity to get short again, or add to short positions.
The initial downside objective is the January 2010 high, around 1143.
Previous resistance usually acts as support, at a later time, when retested.