26/10/2007

Futures analysis

Today's session in a daily timeframe posted another doji candle, indicating stall/reversal in the market. Similar patterns were rejected constantly in the past, so there is still a chance, that we are going to break through the all-time high, especially when the price remains above the rising moving averages. As I pointed out in one of my previous analysis, we are witnessing now a situation, which was taking place in the early october. The market plotted reversal candles, such as dark cloud cover, shooting star, doji and still got pass through solid resistance levels. Recently, we have the same behavior in the futures. Key thing to note is that both situations were developing on a rising open interest, which was the main catalyst for squeezing the short holders and skyrocketing the price.

In the morning, the futures finished thursday's decline and adjusted direction of the channel, in which recent consolidation is taking place. Now, the nearest level of support is probably near 3870 and resistance is at 3940 - that defines consolidation range. Beyond that, there is only this historical resistance to be 'taken out' in order to establish a new peak - 3960. The last thing is obviously price target. My bet is for the measured move taken from 3770 to 3940 and added to 3870, which gives us target of 4040. American stocks have bounced off their prior levels of resistance and are now rallying on better-than-expected earnings reports, so that is a good catalyst supporting eventual breakout in WIG20 futures.