20/04/2008

Futures analysis

The pullback continues to develop, as the market managed to get back and retest crossing daily moving averages (10-, 20- and 50-day). The middle line of symmetrical triangle, that I pointed out couple of posts ago has remained defended, but still serves as a key pivotal point for the daily timeframe. Volume is slightly lower, though has not form itself in a clear diminishing manner, which would indicate a typical pullback here, over the last few days. Upcoming week will resolve current situation, as the futures are entering crucial resistance areas (explained below in detail). The most important, decisive factor here is that the price must not confirm resistance at current position, if we are to witness upside intermediate term trend reversal (meaning a breakout above upper triangle band). If the moving averages are confirmed as resistance, then I expect the middle line to be retested.

Throughout the last couple of days, the futures have managed to get back above key intraday resistance area, which lies between 2913 and 2930. In my previous analysis I stated, that if the price manages to pullback that far, then I expect it to retest prior support level 2970-90. As you can see, the market is simultaneously penetrating resistance levels, which align in multiple timeframes (moving averages correspond with intraday points). Now, that this prior intraday support area (2970-90) has been tested from the downside, the next thing to watch is going to be eventual confirmation. You can see, that before the close on Friday, the futures double tested this level, by posting upside spikes. These spikes so far prove to be bull traps, as the price closed below 2970, but not if we take into account the global markets. WIG20 futures always remain under strong influence of american stock market, which closed over 1% to the upside on Friday. Such occurences usually cause overnight gaps, so the market can even skip the whole resistance area and open above 3000. If not, the plan is exactly the same as for daily timeframe: confirmation of 2970-90 resistance completes downtrend continuation pattern sustained move above 2990 will lead to a retest of 3030 at least.