Thursday 14 February 2008

Trend Lines and Congestion Zones

Two trend line congestion zone examples today. Yesterday's article talked about the unconvincing break up to 1,370 and possible cycle down trend kicking in below 1,360. Well the Emini spent the morning unable to break 1,370 and consolidated above 1,363.

Emini Trend Lines Consolidation Zone Image

Trend Line Congestion Zone (Emini 2,097 tick)

The Emini eventually broke below 1,363 and pushed down to 1,348. In the chart above, the congestion zone bars are painted white using the Better Trend Line indicator. This is a great tool for getting on board strong trend moves, like today.

The chart below shows the Emini has now re-entered the Trend Line congestion zone on a daily chart.

Emini Trend Lines Consolidation Zone Image

Trend Line Congestion Zone (Emini daily)

Where to from here? I'm not convinced the Emini is now headed down - even though the 135 minute down cycle is now confirmed.

We saw a lot of buying volume enter the market at 1,347. This level was tested again in the late afternoon and again a large amount of buying volume entered at 1,348.

It's possible we're going to have another attempt at breaking the down trend line - remember holidays (President's Day on Monday) are usually bullish. But we'll need large volume to break the down trend line convincingly.

FYI I'm getting on a plane to go snowboarding in Japan today. I'll still be trading and posting on the blog but maybe less consistently. Good luck with your Emini trading.