History tells us that when a resistance level is not crossed in four attempts, then the resistance is high and needs to be respected.
Next, there seems to be a clear trendline break (marked Usual trendline) and that can be considered another warning.
Now, note a second trendline that I have drawn to the chart, marked as ‘Possible revised trendline’.
The rule for trendlines is that whenever there is a new high created, the trendline’s second point needs to be revised.
Based on the recent moves seen on the RSI there are three Rsi high points.
I have marked 4 highs that have been attempted around the 22750-800 area. History tells us that when a resistance level is not crossed in four attempts, then the resistance is high and needs to be respected. So, let’s for now consider the 22800 is a solid resistance. Next, there seems to be a clear trendline break (marked Usual trendline) and that can be considered another warning. Further, the last minor swing low has been broken decisively by Friday decline. There is fourth as well (not shown in this chart) and that is, formation of a bearish engulfing pattern in the Daily chart. So, not painting a pretty picture for the moment.
Now, note a second trendline that I have drawn to the chart, marked as ‘Possible revised trendline’. This line is drawn because there is a new high price print. The rule for trendlines is that whenever there is a new high created, the trendline’s second point needs to be revised. Accordingly, the last minor low which was joined to the 19th April low cannot be used and we may have to use the low made on Friday (assuming that market goes no lower) and that would mean that the trend is not broken as signaled by the break of the Usual trendline. This is a nuanced interpretation of trendline rules.
Another possible nuance is drawing trendlines using Closing (Line) chart. This is shown as an inset within Chart 1. In this chart, note that there is no fourth attempt as it was only a high price print and not a closing level high. This is not captured by the line chart and hence, after three attempts at the resistance level, the prices cracked a support trendline and also set up a minor lower top and lower bottom pattern, thus signaling a possible change of direction in the short term. Thus, here the break of the trendline is valid.
We can also use momentum signals to decide which of the two is applicable. Chart 2 shows the same 75min chart with RSI added. Based on the recent moves seen on the RSI there are three Rsi high points. The second one is a Class 2 type divergence but the third one is not really a clear divergence. So, the outcome is indeterminate.
