Can Bears Force a Powerful Retest of the November 26th Low?
Can Bears Force a Powerful Retest of the November 26th Low?
Financial markets always present a battleground between buyers (bulls) and sellers (bears). In this analysis, we examine the current market situation and the sellers’ potential to retest a crucial support level. Wednesday’s (December 3rd) candlestick was a bearish doji, closing near its lowest point, indicating significant selling pressure.
In our previous report, we noted that traders would closely watch whether buyers could generate follow-through buying or if the market, despite a slight ascent, would face a long upper tail and close below the 20-day Exponential Moving Average (20-day EMA). The market rose during the morning session but then pulled back, closing near the 20-day EMA. FCPO (Crude Palm Oil) currently trades below the 20-day EMA after the overnight session.
The Bulls’ Perspective on the Market
Bulls hope the current decline will form a significant higher low. They anticipate that the recent tight trading range (in November) represents the final flag of the move. They want the market to return to the tight trading range and above the 20-day EMA, where it currently sits.
Bulls also hope to achieve a price reversal from a large wedge pattern (formed on January 17th, May 8th, and November 26th). They view any pullback merely as a retest of the November 26th low and desire this retest to be weak (characterized by overlapping candlesticks and weak follow-through selling). Ultimately, they aim for a major trend reversal with a higher low. Buyers must produce strong follow-through buying above the 20-day EMA to clearly demonstrate their control of the market.
The Bears’ Perspective on the Market
Bears want the 20-day EMA to act as a resistance level, followed by a retest of the November low. If the market trades higher, they expect the November 19th high (around 4250-4300) to serve as resistance. They hope to create a third downward move to complete the wedge pattern, with the first two moves occurring on November 13th and November 26th, pushing prices lower.
Fundamental Factors Influencing the Market
Fundamental factors also play a significant role in determining market direction:
- Production: Production may decrease in December, potentially supporting prices.
- Refiners: At these lower prices, buying interest exists. Refiners are not paying an additional premium over spot futures.
- Exports: ITS reported that exports in November decreased by 19.68%, indicating weaker demand.
Forecasting Future Market Movements
The market fell into a tight bearish channel, then faced a tight trading range in November, which could be the final potential flag. This was followed by a second sideways or downward move on November 26th. This week, the market experienced a retracement towards the 20-day EMA. Moving forward, traders will observe the strength of the retest of the November 26th low. Will this retest be strong, breaking below the November 26th low? Or will it be weak, perhaps stopping around the December 2nd low area?
Today (Thursday, December 4th), traders are carefully watching whether sellers can generate follow-through selling and close significantly below the 20-day EMA, or if the market, despite a slight decline, will close with a long lower tail and above the middle of the candlestick.
This analysis is based on available data and technical patterns. Always conduct your own research and due diligence before making any trading decisions. Source of News
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