Channel Retest Coming, but First...
The market has fallen back toward the lower channel line. We can expect it to complete the move by returning fully for a retest, where it will either reverse or break through the trendline (lower red line). However, there is a short-term price barrier which must be overcome before a retest is possible, which may have gone relatively unnoticed.
Observe the first swing down after the prior retest of the upper trendline. This is the range from the point labelled A to the point labelled B. When Fibonacci divisions are taken of this range, and translated such that the 0 line aligns with the high at point C, the result is the yellow levels shown. The reason the levels are moved to align with point C is because that is where the second downward swing begins. That is, we are checking for the levels where the second downward swing is proportional to the first swing down.
You will notice that the 1.618 level has been tested by the current candlestick which has thus far retraced a bit. This has potential to act as support. However, it is equally likely that the support is only short-term and will be broken soon to make the retest. It is possible that the market responds strongly to this level and doesn't even reach the lower channel line. For traders waiting for a long at the lower channel line, be aware of this level and the potential support it may provide.
It should also be noted that if the market does break below the 1.618 level for a retest of the channel line and the market reverses, it may find its first resistance at this 1.618 level if the polarity flips.
Observe the first swing down after the prior retest of the upper trendline. This is the range from the point labelled A to the point labelled B. When Fibonacci divisions are taken of this range, and translated such that the 0 line aligns with the high at point C, the result is the yellow levels shown. The reason the levels are moved to align with point C is because that is where the second downward swing begins. That is, we are checking for the levels where the second downward swing is proportional to the first swing down.
You will notice that the 1.618 level has been tested by the current candlestick which has thus far retraced a bit. This has potential to act as support. However, it is equally likely that the support is only short-term and will be broken soon to make the retest. It is possible that the market responds strongly to this level and doesn't even reach the lower channel line. For traders waiting for a long at the lower channel line, be aware of this level and the potential support it may provide.
It should also be noted that if the market does break below the 1.618 level for a retest of the channel line and the market reverses, it may find its first resistance at this 1.618 level if the polarity flips.
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