Slight downtrend (yellow line) with a lot of overlapping bars. So, bears and bulls both active. Then a 32 bar trading range (also with overlapping bars so bullish and bearish pressures). The blue rectangle around the range is basically an extended bear flag because the trend is slightly down (yellow line). In addition, at the BO south out of the range at that point price is BELOW every single MA on the chart. Signs of weakness.
After 20 to 30 bars in a TR the BO direction is 50/50, north or south. This TR has 32 bars so BO can be in either direction. So we see the BO is south. Most BO’s (80%) fail and price heads back towards the range within 5 bars. Understanding this stat the next thing to look for is will the BO go back into the range or is it going to be a successful BO?
What to look for in a successful BO. Larger bear bars (in this case). Consecutive bear bars (FT). Bars closing near their lows. Price going lower than the last 40, 50, 60 bars (i.e) a NEW BO low is made, PB’s that are at or beneath the BO point. A resumption of the BO direction after PB’s, which happened.
All of the above was present in the BO so once price resumed …red bar …after the PB (i.e. after those two black bars) it is reasonable to expect at least 1 more leg down and maybe even more than one leg after the initial BO leg.
In summary, big slightly sloped channel down (yellow lines ..don’t have the lower one drawn in) with alot of buy and sell pressures in the channel. It morphs into a narrower TR (blue rectangle) with overlapping bars. So the larger context shows bearish pressures at play and the range shows both active. Price staying around or below most of the MA’s for some time. And there is follow through (FT) on the BO.
I see nothing that indicates bullish. That is my take on it.
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