28/5/25 - Can Bears Get a Strong Retest of the Low? FCPO
Friday's candlestick (Apr 25) was a bull doji closing in its lower half with a long tail above.
In our previous report, we said traders would see if the bulls could create another follow-through bull bar testing near the 20-day EMA, or if the market would trade slightly higher but stall around the 4050-4080 area or the 20-day EMA area and reverse lower, forming a retest of the April 22 low instead.
The market gapped up on Friday morning trading far above the 20-day EMA, but reversed to close below it.
The bears see the current move as a pullback following the climactic selloff and oversold conditions.
They want the 4050-80 area or the 20-day EMA to act as resistance.
They want at least a retest of the recent leg low (Apr 22) followed by a strong breakout and a measured move based on the height of the 5-month trading range (AFTER the pullback).
At the least, they want a small sideways to down leg to retest the April 22 low, even if it only forms a higher low.
The bears must create a strong follow-through bear bar on Monday to increase the odds of another leg down.
The bulls got a reversal from a wedge pattern (Mar 25, Apr 9, and Apr 22) and a lower low major trend reversal.
They hope to get a 2-legged pullback closing above the 20-day EMA.
The market traded above the 20-day EMA on Friday but reversed to close below it. The bulls are not yet as strong as they hoped to be.
If the market trades lower, they want it to form a higher low (vs Apr 22) and a double bottom (Apr 22) followed by a second leg sideways to up.
They want any retest of the April 22 low to be weak, sideways and with poor follow-through selling.
The bulls want a TBTL - Ten Bars, Two Legs pullback. That means they want a second leg sideways to up after a pullback.
The selloff from April 2 to April 22 was strong enough for traders to expect at least a small sideways to down to retest the April 22 low (AFTER the current pullback), even if it forms a higher low.
Perhaps we may see the retest of the April 22 low early next week.
If the market forms a retest of the April 22 low, traders will see the strength of the selling. If strong, traders may expect a breakout attempt below the April 22 low.
If it is weak, we may see more profit-taking from the bears moving forward, followed by a larger second leg sideways to up after that.
For tomorrow (28/4/25), traders will see if the bears can create a strong bear entry bar closing near its low.
Or will the market trade slightly lower, but lack strong follow-through selling, closing the candlestick with a long tail below or a bull body instead?
The market remains in a large trading range (4500 - 3850). Traders may Buy Low and Sell High within the trading range.
That means buying in the lower third of the trading range, and selling in the upper third until there is a strong breakout from either direction with follow-through buying/selling.
Andrew
