– The bears have been drifting down in a tight bear channel since the failed bull breakout on Jan. 12.
– The bears managed to get a bear breakout yesterday, closing below the close of the past 27 days.
– During the overnight session, the bears managed to sell off over 80 pips, breaking below the two-month trading range and the start of the June 19, 2020, bull channel (1.1168).
– As of this moment, the bear breakout over the past two days is strong enough so that traders will expect at least a second leg down.
– The bears are hopeful that they get a measured move down of the two-month trading range of around 200 pips; however, it is more likely that the bears will be disappointed soon, and traders will view this bear breakout as a break below a final flag.
– So far, today is becoming the biggest bear bar since the bear trend started back in June 2021. A big bear bar late in a trend is usually a sign of exhaustion and an end to the sale of soon.
– The risk the bulls face is that today’s big bear bar is breaking below an obvious trading range which increases the chances that this is the start of a breakout that could fall much further than what traders want.
– Traders need to see how today closes. At this moment, I expect today to look disappointing for the bears. One reason for that is that currently, the bar is over 100 pips tall going into the U.S. session. The bears will have to keep the price down here for the remainder of the U.S. session, which I do not think is likely. Also, we are at obvious support levels.
– Traders will look for a trend reversal setup, such as a major trend reversal or trend resumption pattern at some point in the day.