- Thursday’s candlestick (Jan. 22) was a bull bar closing in its upper half with a small tail above.
- In our last report, we stated that traders would see if the bulls could create another strong follow-through bull bar, breaking above the December 3 high, or if the day would close with a long tail above and close below the middle of its range.
- The market traded higher for the day, with slight profit-taking at the end of the day.
- 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 need to create strong consecutive bull bars trading far above the 20-day EMA and above the top of the trading range to increase the odds of reaching the measured move, which is around 4250, using the height of the trading range. So far, this is the case.
- The market tested the December high this morning (December 3). Bulls need a strong breakout with sustained follow-through buying 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.
- They want the 20-day EMA to act as a support level.
- The 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 20 days +11.38%
- So far, the bulls created a strong breakout above the trading range with follow-through buying.
- As we approach February, the mechanics of the CNY festival and reduced working days will increasingly impact buying and selling behavior.
- For today (January 23), bulls want a strong bull bar so the weekly candlestick will close near its high and above the 20-day EMA. Bears want a strong bear bar, so the weekly candlestick will close with a long tail and below the middle of the bar.
Andrew
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