This black diamond tells you to leave JSE stocks alone
Last week I was fooled. The JSE told me that upside was in order, and I thought it was about time. But once again, it just roped me in before it took a tumble.
When I went to my charts to analyze the JSE, I saw a frightening pattern.
The black diamond!
Sometimes a technical diamond is the perfect sign for a market recovery.
And sometimes, the diamond is as black as soot, and predicts more downside is on the cards.
Unfortunately, we have the latter diamond. And this tells me that the JSE is ready for its next down leg.
Allow me to do the honours and explain to you…
How this black diamond fooled me!
Share prices on the JSE were slightly higher on last week.
It gave me the sign that finally, the market was ready to recover from its long-lasting correction.
But the positive sign was short lived. I was fooled to think that the market was ready to go back to its all-time highs.
This week, local shares took a tumble once again.
See how the deadly black diamond, predicts more selling!
From June 2015 ‘till early August, we’ve had the JSE All Share Index trade in a range. However, this was not just an ordinary sideways range. No! It was, what us trader’s like to call, the bullish/bearish diamond formation.
The reason that we call it the bullish/bearish formation, is because the price can break out of the diamond formation in any direction.
Early in August, the formation broke out of the diamond shape to the upside. This is where many many many investors and traders (including myself) got in and started buying the markets.
But then something happened.
The JSE diamond was a fugazi!
After four days of the price hesitantly trading out of the diamond formation, the market thought enough was enough.
In just one day, the JSE-ALSH fell 3.2% down. It did not only take the price back into the diamond formation, but also out of the formation to the downside.
All of the traders and investors who went long, are now licking their wounds.
Now it looks like the JSE-ALSH’s next target will be down to 49,605.
So what do you while the JSE bounces like cat in a sack?
Well to be honest, patience seems to be the name of the game. We just need to wait it out until the JSE chooses a proper direction.
And that’s all I can say for today.
“Wisdom yields Wealth”
Managing Editor: Trading Tips
Head Analyst: Red Hot Storm Trader
Author: 94 Top Trading Lessons of All Time
Missed the Forex 101 Workshop? It's not too late to be the 121st person to join! Click on the photo below