Sunday, May 17, 2020

US indices: A perfect set up for short sellers?

Last week has been a rough week where US market started the week with a fall of 1000 points in 2 days, however, it manage to regain some of it losses by end of the week. 

Though it had regain some of it losses, but this doesn't mean we are safe yet, unless DJIA and SP500 manage to stand back above their "Thick blue uptrend supporting line". Failing to achieve this requirement then it will be " A perfect setup for short sellers"

lets begin our weekly update.. 


DJIA retraced and close lower for the week. DJI break the critical support of the thick blue line which is not a good sign. DJI had once again challenge the support on 23380 where it break it and regain its stand after a day.

However, looking at the chart pattern BCF think that DJI doesn’t look good. This is because it had drop below the thick blue supporting line. It is important for DJI to stand back above the thick blue supporting line, failing to stand back on it will indicate a “significant” downtrend is coming.

Scenario A

The DJI manage to go up and stand back on the thick blue line then everything will still be alright.

Scenario B

DJI manage to go up but failed to stand back on the thick blue line and started to retrace. Breaking the support on 23000 which is also the low on 14th May will not be good.

Scenario C

This will be the trickiest scenario, where DJI manage to get back above the thick blue supporting line, but break down after that. This indicate the break up is a fake signal and dropping below the tbs line will be very bad. This might see a strong downtrend which looks like a downpour.

BCF personally hope for scenario A, however, please be aware and cautious of scenario B & C and get ready your trading plan if that’s happen. Personally, scenario B & C could be an ideal setup for short seller.

Supporting: 1. 23380                      2. 230000                           3. 22800

Resistant: 1. 23856                         2. 24000                             3. 24380

DJIA Weekly

Apparently the bullish engulfing pattern last week had failed. The big red candle this week doesn’t looks good as it break the critical thick blue line support. However, the good point is that it still manage to close back above the supporting of 200 weekly moving average. 


SP500 had also follow the trading pattern of DJI where it break down the critical thick blue line supporting and the monthly neckline. The good point is, it manage to stand back up on the thick blue supporting line on Friday. 

SP500 had rose back to the tbs line, however, we need to monitor very closely whether it can support on top of the thick blue supporting line which will be the scenario A.

Scenario B

If fail to stand back up like red arrow 1, and break the support then it could mean a “significant” downtrend.

Scenario C

SP500 stand back up and break down like blue arrow 2 follow by red arrow 2, this will be the trickiest and it would be very bad once it break down the critical supports.

However, to short sellers, this could be the perfect setup that they want.

Resistant: 1. 2900                            2. 2945                                3. 3000

Supporting: 1. 2861                         2. 2821                                3. 2800

SP500 Weekly

The weekly chart for SP500 show something interesting. U can clearly see that the index touches the resistant on 61.8% of Fibo retracement and started to come down, this clearly indicate 2945 is a strong resistant point.

It is interesting to see that SP500 weekly chart had also rebounded from its intra week low and stay above the thick blue uptrend supporting line, this do also indicate it’s a strong supporting level which shall not be broken. 


The strongest index where it still manage to stay above the rising channel. It is interesting to see that the index had retrace and rebounded just after it almost touch the thick blue supporting line. This indicate that the index is well supported and the thick blue supporting line is an important supporting level.

Nasdaq will still be in good shape as long as it don’t drop below the thick blue uptrend supporting line.

Resistant: 1. 9065                            2. 9167                                3. 9227

Support:  1. 9000                             2. 8900                                3. 8800

Nasdaq Weekly

Nasdaq weekly had shown a big doji which is a candle pattern that indicate the index has yet to choose its direction.


Disclaimer: The materials shown above is just for education purposes. No buy or sell calls are intended. Please consult your brokers for investment decisions. The author above will not be responsible for any trading decision and action taken by the readers.  


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