Global indices are nearing resistance - the key question is whether the sellers will show up now that we have had a decent pullback from the March lows?
I have posted a couple of reports over the past two days about how the markets have struggled at the start of this month. Struggle has been both ways, with neither the bulls nor the bears in full control of price action. And with equity markets being the key barometer of the “risk-on, risk-off trade,” other key markets such as FX and gold have also been in a limbo. So how do you trade these markets?
Indeed, with the fundamental backdrop certainly
not looking too bullish, we are leaning towards the bearish side of things for stock indices. However, there has not been much follow-through on the downside following last week’s formation of bearish inverted hammer candles on the weekly charts of the major indices.
So, one way to look for potential short setups is to wait and see if we go back below last week’s lows on the major indices such as the DAX, before taking a trade:
Source: TradingView and ThinkMarkets
If the DAX does go below its lows from last week, we could see the onset of fresh technical selling and what you can do then is to zoom into your favourite time frame to look for potential trades.
Alternatively, you can look for bearish reversal formations on the lower time frames, such as the hourly, now that we have had a decent retracement against last week’s highs:
Source: TradingView and ThinkMarkets
The hourly is nearing potential resistance zone as highlighted on the chart. There is also a potential bear flag pattern in the making. So, should we break below the bear flag, that could be the trigger for the bears to step back in. Let’s see how things will evolve over the coming hours and days.