Given the way the technicals were developing yesterday it comes as no surprise that price moved away from the 4000 $ level to the downside, breaching the 3800 $ level on aggressive selling that does not yet appear to be over at this time. While we are not ready to say that a breakdown from the still intact [members-only content] $ trading range in imminent, at least a test of the bottom of the range seems likely before the bulls are comfortable re-engaging which is why we remain neutral and on the sidelines until further notice. That said, if 3600 $ does get taken out in the not too distant future then we'll be ready and waiting in the ST ProTrade entry area due to the possibility of a higher low or double bottom which presents good r/r opportunity despite elevated risks of a downside breakdown below [members-only content] $.
We'll take one more look at the 4-hour chart this week where we can see that the recent selloff took price below the now broken short-term uptrend line, which voids the possibility of an ascending triangle, on a [members-only content] signal and bearish candle formation that is being followed up by [members-only content] despite a respite from the selling over the past few hours, all of which suggests that the bears are now back in control. Also note that the EMA's have been broken to the downside and have already reversed back to bearish, the 50 and 100 SMA's have been broken too and are rolling over as well, new dynamic resistance has begun to build around [members-only content] $, and the Ichimoku Cloud is very close to flipping back to bearish out in front of the market, so the bears still have a good opportunity to drive prices lower from here. Granted, there is quite a bit of near-term support around current levels so there is a chance that the [members-only content] $ level holds for long enough for the bulls to return, although we think odds are more likely that [members-only content] $ gets another test given is importance since late December.
As far as momentum and volume are concerned, notice that Willy is moving lower but still has some recharging to do, MACD is accelerating below its zeroline, and PPO just started flashing neutral signals so there appears to still be room to run lower from a momentum perspective, although RSI and the Stochastic area already very close to oversold so perhaps [members-only content]. Additionally, bearish exchange volumes have spiked and are eclipsing those from the recent up moves, the A/D line has taken a hit and still looks heavy overall, and the volume profile setup remains very thin and porous below the market, especially around the [members-only content] $ area, so we certainly cannot rule out a move down there if [members-only content] cannot hold through this weak part of January.
We'll also take one more look at the 3-day chart for an expanded view of the medium-term setup where we can see that price once again failed to get above the still bearish upper EMA earlier this week which helped to trigger the current selloff thus sparking a [members-only content] signal on a bearish candle formation that is turning market structure heavy and is close to voiding the IH&S that everyone has been hoping for since the beginning of the year, none of which bodes well for the bulls moving forward. Also note that the 50 and 100 SMA's remain in steady downtrends and are both below the 200 SMA and the Ichimoku Cloud is starting to expand to the downside again out in front of the market, both of which should keep sell pressure on the market moving forward, although price is getting very close to the top of the upper demand area which has historically acted as support on weakness so we'll see if buyers emerge if price gets below [members-only content] $.
Moving on to momentum and volume, notice that Willy never truly got out of oversold territory, RSI has already rolled over following an anemic move to the upside, the Stochastic is stalling out in no man's land with room to run lower, MACD looks close to crossing back below its zeroline, and PPO stopped flashing strong buy signals overnight, all pointing to more downside in the near future but with a decent possibility of a hold of the 3122 $ cycle lows which could help the bulls' case tremendously. Additionally, while exchange volumes have turned bearish over the past 24 hours they remain subdued compared to what we saw last month, the A/D line has been under pressure but is actually holding up fairly well, and the volume profile setup appears most vulnerable around the [members-only content] $ level, so if the bulls can indeed defend the cycle lows then we think a rally up to that area is likely as we get deeper into winter.
While it would be encouraging from a short-term perspective to see price bounce hard from the current support region back above the 4000 $ level which would likely spark a continuation back up to the top of the [members-only content] $ trading range, deep down we are hoping that this selloff continues so that we can get a true test of more significant support levels in the [members-only content] in order to get a better sense of where we are in terms of the bottoming process. Also note that the faster this move lower materializes the better it is for the bulls considering that a slow bleed indicates distribution which is a sign that much lower prices are in store. For the time being it does look like price is moving down, and quite swiftly at that, so it's probably time to start paying close attention to price action at key support levels.