Flag Pattern On Dollar Index - Prices Going Higher?
Simit Patel | Aug 31, 2015 01:00AM ET
Below is a daily chart of the dollar index. Note that we see price in a downward channel. Further note that price almost perfectly bounced off its most recent test of the bottom trendline of the downward channel this past week.
When we zoom out to the weekly chart, though, the channel appears more like the flag or a flag pattern. As our lesson on flag patterns suggests, this would suggest a continuation pattern is unfolding -- and that the market may be consolidating the sharp gains it made from July of 2014 to March of 2015 before heading even higher.
That this past week was a pin bar candle that that shows the bulls stepping in to defend the trendline going back to mid-May (the dotted blue line in the chart above) is another sign I find interesting, and potentially suggestive of a further rally.
If the market breaks south of the bottom trendline of the channel we are currently in, or if we close below 90, I think the bull case may be off. Till then, though, I think traders willing to go off the weekly chart may find opportunities in buying dips, largely light of the flag pattern that is in place.
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