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EUR Topping Update 1 |
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Written by Jason
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Friday, 31 December 2004 |
My theory has started to become validated as the euro broke through multiple trendline support. It seems as if massives stops were triggered and huge accounts are being liquidated given the severity of the descent. A retracement of this move is due which will then be followed by another break below the current lower channel support.
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EUR/USD Topping |
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Written by Jason
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Thursday, 30 December 2004 |
Euro has been extremely bullish lately and I noticed a very unfamiliar pattern being created on the charts in which peaks were higher & bottoms were lower. Puzzled, I searched around to see if this pattern had been documented elsewhere; indeed it is.
Broadening Formation - "This price pattern is an unusual variation of the triangle and is relatively rare. It is actually an inverted triangle or a triangle turned backwards. Trendlines actually diverge in the broadening formation, creating a picture that looks like an expanding triangle. It is also called a megaphone top. The volume pattern also differs in this formation. In other triangular patterns, volume tends to diminish as the price swings grow narrower. Just the opposite happens in the broadening formation. The volume tends to expand along with the wider price swings. This situation represents a market that is out of control and unusually emotional. Because this pattern also represents an unsusual amount of public participation, it most often occurs at major market tops. The expanding pattern, therefore, is usually a bearish formation. It generally appears near the end of a major bull market." (Murphy)
Yesterday, we bounced off major trendline support and today we broke weekly (and all time) highs solidifying a bullish bias. However, with this formation I am inclined to believe that we have indeed reached a market top. The volume theory for this pattern makes a lot of sense considering liquidity has been dwindling as the holidays approached & is now starting to come back in.
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