The amplitude of rebound upto this moment is very disappointing.
If Level of 224 was not broken, it could develop into a continuation pattern (range 205-224) resulting in a resume of down move; if 224 is broken, still could have a chance to surge to a higher level before the termination down move...
A. Trend classification:
weekly 3-bar
after previous swing bottoms 225 (Dec 2014), 211 (Mar 2014) have been broken, the uptrend started from 2011 is reversed. From the perspective of swing trading method, there is usually a retracement to a higher level to form a lower swing top before it resumes to fall which serves as a confirmation of downtrend.
A signal bottom is observed in the week of Sep. 12th 2015 for a down swing lasted for 19 weeks which provides a marker of a possible counter-trend movement. Only aggressive traders with sound money management are capable to take advantage of this counter move since the move is vigorous and rather short-term. Upto this moment, the market is still trading within the weekly range of this signal bar, we should pay attention to its break-out and follow with good money management.
Trade with the main trend is important for a swing trader.
There is a possible symmetry in time that from week Dec 12th 2014 to week May 2nd 2015 is also 19 weeks compare to that from May 2nd 2015 to Sep 12th. 2015. Besides, mid point of May 2nd to Sep 12th is roughly the week of Jul. 11th 2015 which provides a proportion relationship within this down move.
The slope from high of May 2nd to low of Jul. 11th (thick blue line) is less steep than the one from high of Jul. 25th to low of Sep. 12th. (thick red line)
weekly 2-bar
considering the move from May to Sep 2015, those support levels are similar to the 3-week swing chart. no intermediate swings top/bottom is formed during the period. No hints for any possible turning point is presented.
daily 3-bar
the current trend is a downtrend given a lower-top-lower-bottom scenario. Another signal bottom can also be located in this time-frame on Sep. 8th 2015 (same week in Sep. 12th) which is an outside bar followed by a gap up. This downtrend can only be reversed when it crosses 256 (too high for the moment) or a 3-bar swing top formed in coming future.
From April 27th 2015 to Sep. 8th 2015, it took 92 trading days and the outside/signal bottom was formed. We should pay special attention to this signal bottom after this prolonged down move for a possible change in trend.
daily 2-bar
when we switch to a 2-bar daily swing chart, we can observe that there is a pair of intermediate swings top & bottom formed after Aug. 25th 2015 and the market is, in fact, trapped in a range between 205 & 224. We should wait for a break-out to signal either a reversal or a continuation of a downtrend.
A recent swing top at 22424 is near an old swing bottom 22530 in Dec. 2014. as a resistance.
B. Strategy: (updated on Sep. 25th 2015)
scenario b1. reversal - counter a downtrend
there must be some markers/indicators for an entry: MACD cross,
trendline broken, cross of 225 etc. some analysts think there is a
head-and-shoulders bottom in formation,target 50% of 285-205 re-test
is 245 (matches with a of weekly trendline 2009March & 2012 June
bottoms), more aggressive 255-267 in a zig zag ABC counter swing/wave
scenario b2. continuation pattern scenario
daily 2-bar swing chart - intermediate consolidation would be over after
205 level was crossed, sets cut loss at entry point 2% above the previous
high and trailing stop
scenario b3. side-way for months
can just wait la...
C. Other markers:
1/ MACD - (weekly) no bullish cross, no divergence; (daily) may be a bearish cross
coming
2/ RSI - (weekly) near 30 level but no obvious divergence; (daily) a divergence
between the double bottom (Aug. 25th & Sep. 8th 2015)
3/ Volume - (monthly & weekly) the volume is shrinking from May to Sep. 2015,
volume of bottom in Sep. 12th 2015 is lower than that of Jul. 11th
2015, a possible divergence
4/ Geometry - (weekly chart) market has broken a long-term support trend line back
into 2008-09. It has been respected for many years, and we should be
aware of a possible re-test of the same trend line. However, since the
uptrend has been reversed, I would expect a different (set of) down
trend line would establish & be respected. In fact, expansion and
contraction speeds are different.
