It’s been an interesting week thus far with stocks and commodities. The week started with a large gap up only for strong selling volume to step in and reverse direction the following day.
It is this negative price action that starts to put fear into the market triggering a downward thrust in the market. During an up trend which we are in now, I look for these bearish chart patterns to form as they tend to trigger more selling the following days which cleanses the market of weak positions.
Once a certain level of traders have been shaken out of their positions and are entering positions in order to take advantage of a falling market, that’s when we get the next rally, catching the majority of traders off guard as they panic to buy back their short positions.
It’s this short covering which sparks a strong multi day rally and kicks off the new leg up in the market. >> Continue
– Chris Vermeulen