- Friday’s candlestick (Jan. 23) was a bear bar closing around the middle of its range with a long tail below.
- In our last report, we stated that bulls want a strong bull bar so the weekly candlestick would close near its high and above the 20-day EMA, while Bears want a strong bear bar, so the weekly candlestick would close with a long tail and below the middle of the bar.
- The market traded lower but reversed off its low towards the evening. The weekly candlestick was a bull bar closing in its upper half with a prominent tail above.
- Bulls got a reversal from a large wedge pattern (Jan 17, May 8, and Dec 19), a smaller wedge pattern (Nov 3, Nov 26, and Dec 19), and a double bottom bull flag (January 5 and December 16).
- They want a measured move using the height of the trading range to the 4250 area.
- Bulls need a strong breakout with sustained follow-through buying above the December high to reach the November 19 high.
- If there is a pullback, bulls expect to get at least a small sideways to up leg to retest the current leg high, even if it only forms a lower high.
- If there is a deep pullback, they want the 20-day EMA to act as a support level.
- Bears want a reversal from a double top bear flag (December 3 and January 22).
- They hope the December 3 high will act as resistance.
- If the market trades higher, they want the 4250 or the November 19 high to act as resistance.
- They need to create strong bear bars trading below the 20-day EMA to show they are in control.
- Fundamentals:
- • Production: Production for Jan - SPPOMA first 20 days -16%
- • Refineries: Buying interest is there at these low prices. Not paying premiums vs spot futures - yet.
- • Exports: ITS first 25 days +9.97%
- So far, the bulls created a strong breakout above the trading range with follow-through buying.
- The move is in a tight bull channel, indicating persistent buying.
- As we approach February, the mechanics of the CNY festival and reduced working days will increasingly impact buying and selling behavior.
- For Monday (January 26), bulls want a strong breakout above the December high. Traders will see if there will be short covering above the December high, where potential stop loss levels for bears are located.
- Or will the bears be able to create a pullback to retest the 20-day EMA?
Andrew
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