Friday, May 2, 2014

A look at the Candlestick Technical Condition of TYM4

TYM is higher on the day, but only marginally.  It is higher by 2.5 tics as I write.  The contract appears likely to form a bearish hanging man.  The hanging man is an important topping pattern.  It helps us to recognize a potential shift in sentiment.  Western style analysis might emphasize the ability for the contract to recover earlier intra-session losses, but candlestick analysis concentrated on the apparent indecision depicted by the small differential between opening and closing prices.  The lack of substantial progress by the bullish contingency is of overriding concern as it shows the bulls failing in their charge.  This is what characterizes a top following bullish trending price action.

Note also that this pattern comes near to recent highs.   Today’s high 124-29(Bearish Hanging Man); Feb 3 high 124-28(Bearish Harami); Mar 3 high 125-06(Bearish Hanging Man); Mar 14 high 125-00 (Bearish Shooting Star);Apr 14 high 125-02.5(Bearish Dark Cloud Cover).  Finding resistance at these old high marks should not be a surprise.  In fact, today the cash yield touched a 6 month low.  So any indecision noted here is charged to the bullish contingency.  It makes no sense to say the bears are confused.  Of course they are confused and the higher settle today means they are lighter in the wallet.  However, they are there and any subsequent encouragement will foster further selling.  The bulls will give up much easier now that they have failed to promote the trend today.

A bearish reversal such as we may be seeing today will need to be confirmed for the conservative position taker.  Should prices open lower on Monday and finish lower still, it will be viewed as confirming.  Otherwise any new short positioning going home today on the back of a technical reversal should be with lower delta options.

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