Strength Continues

Weekly Continuation

Following the week ending “outside” day reversal with a close near the session’s high, two Friday’s ago, the now soon to expire prompt gapped through the still declining moving average when trading resumed last week and formed a daily continuation gap that remains open between $2.132 and$2.140 ( it has been a while that a support gap has not been filled immediately). That gap higher opening kicked off an extension of the rally, the first three day rally since the recovery from the February low. At the high point of the two weeks late February/early March rally (which also occurred on a Friday) then prompt April failed at the declining 10 – week SMA and that is exactly what the two weeks rally from the April low did ( so far). This value of the widely watched 50 – day simple moving average (the 50 – day SMA is about the same as the 10 – week, but because of holidays, not quite) on Tuesday was $2.368, the week’s high was $2.385 (which was also the low of 03/15 ). The converging conventional and moving average resistance was way too much for the prompt gas to get through on the first try, particularly given that volume was falling (Monday 545,000 (which was less than during Friday’s reversal day volume of 563,000. ), On Tuesday , the day of the high, the volume clocked 377,800, but the 20 – day SMA showed up as support. Recovery from the now flattening moving average support left the prompt higher in four of five trading days, the gap still open and with the highest weekly close of five.

The recent two week rally does not signify the end of the bear market, but it is becoming easier to see the construction of a short – term base since the middle of March on the continuation chart. Substantial downside momentum that had built during the precipitous decline from the December high seemed to be exhausted when prompt gas rallied 50+% from the February low closing not far off the month’s high, Typically, that is about as positive as price action gets after trading a very significant low with a momentum divergence.

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