Thursday, October 17, 2013

Three White Soldiers bullish reversal ?

'Three White Soldiers'
"A bullish candlestick pattern that is used to predict the reversal of the current downtrend. This pattern consists of three consecutive long-bodied candlesticks that have closed higher than the previous day, with each session's open occurring within the body of the previous candle. These long-bodied candlesticks are a sign of the change in investor sentiment and are used by traders to confirm a shift in momentum. This pattern may form after a period of consolidation, which is still a valid sign of a move higher, but it is not as desirable as it would be if it were found at the end of a prolonged downtrend."

At the close of yesterday's trading session we could observe a Three White Soldiers pattern emerging - please compare with the chart. Perhaps it is not as perfect as the books say, nevertheless there can be something in it.

The carbon rally was triggered - yet again - by political comments from Mrs Merkel saying that Europe needs "a certain degree of back-loading for EUAs". While weekly auctions might slightly dampen the bullish undertone, the market is still very nervous to any rise in prices. Take the EIB news, which had some impact, compare this to Angela Merkel's 'comments', that caused a spike in prices, the former had substance the latter was political speak in action.

The chart above also contains Fibonacci retracement levels. One could observe that 4.60 - 38.20 retracement level and a 100 DMA was a strong support. The price barely touched the highs of August, when it retraced down at the beginning of October. We could probably see 20, 30 and 50 DMAs (5.14, 5.23, 4.93) acting as supports while the market tests this week bullish reversal.

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