Friday, 13 August 2010

11:31 BST - ES Update: A confluence of resistance

Here's something you might find interesting (or not!). Some interaction between pitchforks, conventional technical analysis of lines of resistance and moving averages and the ichimoku cloud resistance on a 60 min chart of the emini S&P futures:

ES 60 min:

The red downard fork has been on the chart since 10 August. It was only speculative because the lower line isn't drawn off a pivot, I just drew it so that the median line cut through the price action that preceded the pivot which formed the start of the upperline of the fork.

It wasn't perfect in containing price, but it did a reasonable job. The median line did provide resistance yesterday for a while, and when price broke above it, it came back briefly to test that median line.

As we would expect when price gets above the median line of a fork, it went up to the upper line and broke through it this morning.

You can see that an upward green fork was drawn from pivots that occurred yesterday and price seemed to be following the median line of thaat fork up.

However, it hit an area which represents a confluence of resistance as identified by various groups of traders - those using pitchforks, (price was re-testing the median line of the green fork having backed off it earlier) those using ichimoku clouds (price was hitting the underside of the cloud) and those using conventional technical analysis of resistance lines (see the blue horizontal line) and moving averages (price came to the 50ma).

With price hitting an area of resistance being looked at by all those groups of traders, you can see the reaction that just occurred.

I've now drawn in another fork (purple) using the pivot high we hit today. If this down move is to continue, we should see price move down to the median line and, possibly below (like it did in the red fork). Let's see.