Posted by: stockscooter | May 18, 2012

Head Fake

The long-term monthly charts of the U.S. Dollar had been extremely negative this year.   Each monthly candlestick circled on the chart in yellow was very bearish.  The first red stick was a shooting star, the second a spinning top, the third and inverted hammer and the fourth another shooting star.  These all have shadows or wicks on the top of the candlestick, which shows overhead resistance and selling.  But in May, the green candle has engulfed the previous four bodies! Simultaneously, the  bottom window indicator, circled in blue, is about to become extremely bullish.  This head fake could cause a lot of short covering, which may already have begun.  The month isn’t over, but if we stay strong as these two indicators come out of oversold together, it would be  extremely bullish for the dollar.  This may only be a last C wave correction upward, but it still could easily take it to the 23.86 Fib. retrace, if not a little higher over the next few months.  The Caveat here is the month ain’t over, yet.  Could this month end with a huge shadow on top of the candlestick, like the previous four?  Best to wait and watch for more confirmation, but things are starting to look very bullish on the dollar.

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