1/5/25 Pullback or Will Bears Get Follow-through Selling? FCPO

• Wednesday's candlestick (Apr 30) was a bear bar closing around the middle of its range with a long tail below.
  
• In our previous report, we said traders would see if the bears could create a retest and breakout attempt below the April 22 low or if Wednesday's candlestick would close with a long tail below instead (if this is the case, it will indicate some profit-taking around the trading range low (3850 area)).
  
• The market did not break out below the April 22 low and the candlestick closed with a long tail below.
  
• The bears want a retest of the recent leg low (Apr 22) followed by a strong breakout and a measured move based on the height of the 5-month trading range.
  
• The bears must create strong follow-through selling to increase the odds of a successful breakout.
  
• If the market trades higher over the next several days, they want the 20-day EMA to act as resistance and form a double top bear flag with the April 25 high.
  
• The bulls want the current move to form a higher low (vs Apr 22) and a double bottom (Apr 22).
  
• If the market trades below the April 22 low, they want a failed breakout and a reversal from a lower low major trend reversal.
  
• As strong as the current selling is, the bulls see it as a sell vacuum and a bear leg within the trading range.
  
• They hope the bottom of the trading range will act as support.
  
• They must create strong bull bars to show they are back in control.
  
• Traders expect at least a small sideways to down leg to retest the April 22 low. They got what they wanted.
  
• Next, traders want to see if the bears could create a breakout below the April 22 low with sustained follow-through selling.
  
• If the market trades higher, they will see the move's strength and whether it will form a lower high to April 25 high, forming a double top bear flag.
  
• For tomorrow (Friday, 2/5/25), traders will see if the bears can create a retest and breakout attempt below the April 22 low. If there is a breakout, traders will see if there are strong follow-through selling.
  
• Or will the market form a pullback towards the 20-day EMA over the next few days instead?
  
• The market remains in a large trading range (4500 - 3850). Traders may Buy Low and Sell High within the trading range.
  
• That means buying in the lower third of the trading range, and selling in the upper third until there is a strong breakout from either direction with follow-through buying/selling.
  
• Breakout from trading ranges can fail and odds slightly favor the trading range to continue.
  

Andrew