Market News & Analysis

Indexes developing lower highs sellers looking at a new move?

May 20, 2019 | CFD News

Looking across stock indexes atm we’re seeing a repeating pattern which could or could not be a sign of danger. This pattern is quite clear across U.S and European indexes atm. The pattern we’re watching is a lower high set up after a main or short term trend break. What is it important? Once sellers break trend momentum its quite normal for buyers to buy in at cheaper prices if that rally fails to make a new high and move back into the old trend it can show traped value buyers ready to be picked off by a wave of new selling. The new decline can also be seen as a lower high confirming the trend break. This can also be seen a step 1 in showing a new change of trend. 

Every trade idea has an exit plan, in the case of this pattern it would be 1, markets continue to rally putting this pattern on hold unless new highs are made. 2, the indexes fall but pause and make new higher lows, this suggests plenty of buyers are still ready to enter the market and stall sellers. 

We’ve picked out two good examples below. The FRA40 (CAC) is also another good example but based on the two examples the price pattern will be clear. 

SPX500 (S&P500)

NDX100 (Nasdaq)

We’ll be watching tonight’s and this weeks action with interest to see if sellers do have the numbers to start putting pressure on the current rallies and if they can confirm the lower highs post trend breaks. 

Good trading from EightCap

All times are in AEST. 

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