Indisputable Strength

I have to confess that the bullish view in my last post was pure tactical. I'm a bear deep inside, convinced by the huge drop on Monday and my long time suspect to the fundamental. That's why I need to have more proof to work against my bias and make me admit the strength of the bull: the upside target could be around 1050.

Look at 60 min chart first. The green line is a support turned from a resistance. It's a valid support / resistance as it has been tested from both sides. The red line is a valid resistance line as it was tested intensively on Aug. 12th and 13th. The market was consolidating within this range and finally it broke out the resistance today. Adding the height of the range to the break out point gives the target at around 1050. Furthermore, the two intraday consolidations (the two blue arrows) that align with the 38.2% and 61.8% Fibonacci points also support the analysis.

On the daily chart, we see the break out is supported by higher volume. The increasing volume in the past four days also shows that the rising has drawn more and more supporters. The range of the bars is also increasing, eliminating the doubt that the rising volume is caused by distribution.

Then on the weekly chart, 1050 was a previous high, another technical evidence pointing to the same target. Clearly we are in an up trend and betting against it would risky. The concern is that the volume this week, a break-out week, is not impressive. Nonetheless, price is the most important, everything else is secondary.

Finally on the 15 min chart, I see a flag, which is a continuation pattern that pointing again to the same target at around 1050. The up side break out of the flag already happened this afternoon, showing that eager traders don't even bother to wait until tomorrow. Another thing is the gap marked by the blue box. This is something we won't normally see in an intraday chart. The gap matches with the previous high, simply showing how violent the bull was when breaking it.

All these sum up to one conclusion. I may still suspect the fundamental. I may still be a bear deep inside. But I will not express it with my cash at this moment.