Three Bullish Signals - What Happens Next?
In the historical charts documented for the different bullish signals, the price rallied rapidly reaching overbought conditions, which is something happening today and a pullback from the current levels is normal.
The shooting star formation is a bearish reversal candle that as studied last week, it has a long upper shadow that is at least twice the length of the real body. This long upper shadow or wick indicates that buyers pushed the price up during the period, but sellers ultimately rejected the higher prices and pushed the price back down. The semiconductors ETF presents a clear example:
$VanEck Semiconductor ETF(SMH)$ The latest weekly candle presents indecision again, this time also with an upper wick or shadow that indicates the selling pressure after a bullish move. Last week this publication anticipated $263 as the bullish target for the week that just ended, and indeed from that zone the price retraced on Friday morning forming the weekly candle mentioned.
Since the oscillator is overbought, and previous similar formations have preceded a pullback caution is key for long positions. One shooting star has been a good warning for a pullback, and two have also provided caution with accuracy as highlighted in the chart. The volume shelf that begins from $231 is expected to act as support zone if a pullback is confirmed.
The use of support and resistance levels helps to validate a potential bearish or bullish setup; the closest levels are in the chart at the top left. The number in black ($257) is the close on Friday, the underlined in green ($259) is the central weekly level for the next week (bullish above, bearish below), which as of today suggests that the price must jump to invalidate the bearish thesis, not the other way around, which adds bearish references for next week.
That said, the current sentiment is determined by the $261 key level. As long as the price stays below it, a bearish continuation is expected with a target of $256.5 which is very close to $255 as monthly level. On the contrary, a decisive move above $261 would signal a potential bullish reversal, targeting $264.8, if that happens next week, $264 must be watched as potential bearish reversal zone as it happened during the week that just ended with $263.
It would be very surprising to see a green candle next week with conviction with the current setup.
Which triggers are on the horizon?
The geopolitical conflict in the middle east and the potential involvement of the United States is something that many market participants are watching, any move that generates fear in the market would be well correlated with the current bearish setup.
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