Technical Analysis – Charts of The Week - Feb 02

US500 Index

• Resistance Zone: 4690 to 4710
• Key Resistance: 4590
• Major Pivot Point: 4450
• Key Support Level: 4300
• Support Zone: 4220 to 4200
• Last Analysis Date: Blue Vertical Line
• 200 Day EMA – Green Line
• 50 Day EMA – Red Line
• VIX – Volatility Index @ 24.83

Trade Insights – US500 –Viable Long positions above the Pivot point at 4450 targeting the Key Resistance at 4590 and then later testing the Resistance Zone at 4690 to 4710.

Alternatively, Short positions below the Pivot Point at 4450 with the first target of Key support level at 4305 and then further Short positions targeting the Support Zone at 4200 to 4180.

US500 Daily Chart

Chart Analysis:

Directional bias: 2 Weeks US500

US500 Index rebounded sharply after plummeting to 4223 by 24^th January. The latest streak of correction in the index started on 4^th January from the all-time peak of 4818 and it fell by almost by 12.4% to later rebound off the downtrend support at the support zone between 4220 to 4200. As corrections normally don’t last too long, we saw a sharp recovery as buyers jumped in to push the index sharply higher.

The price movement on the chart suggests the formation of the Right Shoulder in a Head & Shoulders pattern that started around 24th June. Currently, the prices are heading towards the peak of the Right Shoulder at $4590 in a vertical direction that is also the Key Resistance level on the chart. The next resistance level seems just insight and could be easily achieved before any profit-taking starts. If the Head & Shoulders pattern is really shaping up, then we could see a drop towards the Support Cluster @ 3950 about an 18 % fall. This could then push the Market towards the market crash category (20% and more decline) and inflict more panic in investors that can push the prices further down towards 3800 which is about 21% decline from the all-time peak of 4818.

However, at this stage, the movements in the prices look more favourable and are almost sitting under the 50% Fibonacci retracement level from the January peak to the current low we saw at 4223. Once this resistance is broken then the next key resistance level is at 4590. If prices continue to advance from here, then we could see the market quickly hitting the Resistance zone at 4690 to 4710. From the wave analysis on the chart, it shows prices could also hit the new highs towards 4980 to touch almost 5000 level before we see any huge drop. If the analysis is correct, then the drop from here could be sharper and this could take anything between 6 months to a years time to unfold. Currently, it seems the market has found the inflection point around the Key support level at 4300, and prices are now trading above the 200-Day EMA level and heading towards the 50-day EMA level indicating a reversal in the correction that took place in January. RSI is just under mid-level of 50 points indicating more room for upward movement of the US500 Index.

Fundamental Overview: VIX index of Market Volatility is at 24.83 indicating the market is moving towards the normalisation out of the wild swings we noticed this month. At this stage, the Hawkish Fed Reserve that could increase the rates at least 4 to 5 times this year continues to be a key fundamental theme along with the Geopolitical uncertainty and Covid related issues. Treasury yields are rising, and Dollar continues to strengthen as more central banks are to make monetary policy announcements including RBA, ECB, and BoE. Earnings season is in full swing and key companies like Facebook, Amazon, and Alphabet will report this week. US Non-Farm Payrolls data on Friday is to conclude this action-packed week for Markets.

XBT/USD

• Resistance Zone: $49200 to $50000
• Key Resistance: $43500
• Major Pivot Point: $38000
• Key Support Level: $35000
• Support Zone: $48900 to $29000
• Last Analysis Date: Blue Vertical Lines
• 200 Day EMA – Green Line
• 50 Day EMA – Red Line
• VIX – Volatility Index @ 24.83

Trade Insights – XBT/USD –Viable Long positions above the Key Support Level at $35000 targeting the Key Resistance at $43500 and then later testing the Resistance Zone at $49200 to $50000

Alternatively, Short positions below the Key Support Level on the chart at $35000 to first retest the current Support Zone at $30000 to 29000 the Support Zone at $48900 to $47900

Chart Analysis:

Directional bias: 2 Weeks XBT/USD

XBTUSD has been on the decline since it touched the peak at $69000 on 10^th November last year. The prices have dropped by 50% to touch the trough at $33000 by 24^th January in about 2.5 months’ time. Price actions are not largely controlled by Bulls, and they are holding the prices above the Key Support Leve on the Chart at $35000. These corrections seem quite impressive but fear is still around and demand is not flowing in yet. The existing selling pressure has come from the fact that Fed has indicated more rate hikes in 2022.

The Key Resistance level is at $43500, and the prime resistance Zone is sitting at between $49200 to $50000. The bitcoin could have already touched the inflection point and is already on its way to recovering from the heavy selloff. RSI indicator touched 20 points on 22nd Jan indicating an oversold scenario. Prices are trading quite below the 50 Day EMA and 200 Day EMA levels indicating a full swing bearish outlook of the market. It appears any recovery or drops from here is going to be sharp and sudden.

Fundamental Overview: Several analysts are offering a Bearish outlook for Bitcoins and think that steep correction could be on the way. There is a possibility of prices dropping further toward the Support Zone at $30000 to $29000 the low we last saw in July 2021. However, this zone is also considered a Super Demand Zone and prices could bounce back up from here.