Tuesday, October 6, 2015

EDZ6; T-line Resistance Breakout...fizzles

Candlestick Technical Analysis: EDZ6 (December 2016 Eurodollar Future)

Red December 2016 Eurodollar future is treading water this morning with its latest price equal to the 5pm opening price from last night.  If EDZ6 is unchanged at the end of the session, we say price action has formed a ‘doji’, which is considered an indication of indecision on the part of traders. 

A disappointingly soft employment report prompted buyers to push EDZ6 to a 10th new high on Friday, breaking a bearish trend line resistance and making a ‘bullish engulfing’ of Thursday’s session as many traders abandoned expectations for the Fed to begin normalizing policy rates this year. 

The bullish breakout on Friday was not confirmed by price action on Monday however.  Instead, another in a growing series of ‘bearish harami’ was constructed by trade over the Friday to Monday period. 

We would not be too quick to disregard the bullish nature of trade on Friday.  However, much of the intra-session gains were relinquished by the close that day.  Right now, EDZ6 rests back upon the trend line broken on Friday.  A settle back below that trend line and in particular a settle back below 99.09 would indicate bullish participants were unwilling to support in the correction.  The ‘mid’ of Friday’s open to close is 99.0875 and so the bullish prospects are said to be diminished if EDZ6 settles back below the ‘mid’ within the subsequent three sessions (today is the second).

The take away here is that as impressive as was the bullish breakout on Friday, it has not been confirmed.  Both buyers and sellers are on the fence and unwilling to initiate.  The bullish trend is stretched, but the bearish contingency seems to want to see longs begin exiting before they are comfortable enough to begin initiating new shorts.

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