Similar 2014 Pattern Suggests Bearish Movement

21. Mai 2019

At first, I noticed that the weekly stochs when overbought for an extended period of time had a direct correlation between the length overbought and the price action. The longer the stochs is in overbought territory, the more drastic the price drop will be once it exits overbought territory. I was doing a comparison of other time periods that had an over extended overbought weekly stochs, diving into the smaller time frames and I noticed this pattern back in 2014. You will see that the top 2 charts are the smaller time frames, where at this very moment, we appear to be copying a very similar pattern as 2014, only it's happening much quicker right now, but the pattern is the same. On the bottom, you will see that the weekly stochs for this exact period was overbought for 70 days and resulted in a 60% drop to the downside. We are at 56 days and climbing right now. Once the weekly stochs exits overbought territory, the price action will obviously drop giving us a pull back. This observation may give us an idea of how much of a pull back to expect. It will be interesting to see how accurate this turns out and if it continues to follow that pattern from 2014 for a while.