On open this morning, during the early hours, we see a strong rally through the top of last Friday’s high (22nd). This means a jump of nearly 200 points from the Friday just gone. Consider the average daily range (14 periods) is around 145 points, we can agree that this has already exceeded what would be considered as normal. This price action would suggest ‘price discovery mode’ where price is breaking out from one area of value into another. Most traders are expecting to see a retracement from these highs, perhaps to test the previous area of value and I think that would be a fair price in order to get long, assuming that this momentum continues.
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The channel has broken, to the upside. Perhaps the most significant fact is that the previous trend-defining level of 11640 has also broken. So we can use this broken trend channel to look for retracement opportunities, particularly the trend channel resistance. Normally the price will kiss the broken level goodbye on its way to higher prices. Have we already seen that kiss goodbye?
You may not be able to see the light-grey fork on this chart, but if you can, you will see that we have passed the median line. A return to the median line would be another popular spot for a retracement.
These levels are unlikely going to feature today. But it goes to show that when a market ‘trends’ it often leaves behind previous POCs. Friday’s POC is down there at 546. Add that to your retracement list.