Dollar Index testing Head and Shoulders neckline

Roadmap for the Greek General Index
January 14, 2013
Will EURUSD continue towards 1,36?
January 16, 2013

The dollar index is almost 60% influenced by price movements in EURO. Our bullish view in EURUSD as shown in previous posts is connected with our bearish potential in the dollar index. There is pattern forming in this index, that if exploited, it could provide us with a good low risk profit. As shown in the chart below, the dollar index has most probably completed a formation.

USDindex

 

It is important to see now if the dollar index will break the neckline, in order to activate our trade idea. When prices break the necklines of patterns, they extend lower as much as the height of the head.  Another sign of weakness in the Dollar index is the inability of buyers to push prices above the purple pitchfork resistance and above the resistance.

Concluding, this pattern may need some time to develop as we expect it. Having identified it, leaves us now with only one thing to do…sell if prices break the neckline of this pattern.

As always, thank you for taking the time to catch up on my thinking.

A technical analysis term used to describe a chart formation in which a stock's price:

1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.

The first and third peaks are shoulders, and the second peak forms the head.

Head And Shoulders Pattern

A technical analysis term used to describe a chart formation in which a stock's price:

1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.

The first and third peaks are shoulders, and the second peak forms the head.

Head And Shoulders Pattern

A technical analysis term used to describe a chart formation in which a stock's price:

1. Rises to a peak and subsequently declines.
2. Then, the price rises above the former peak and again declines.
3. And finally, rises again, but not to the second peak, and declines once more.

The first and third peaks are shoulders, and the second peak forms the head.

Head And Shoulders Pattern

A chart used in technical analysis that shows support and resistance, and momentum and trend directions for a security or investment. It is designed to provide relevant information at a glance using moving averages (tenkan-sen and kijun-sen) to show bullish and bearish crossover points. The "clouds" (kumo, in Japanese) are formed between spans of the average of the tenkan-sen and kijun-sen plotted six months ahead (senkou span B), and of the midpoint of the 52-week high and low (senkou span B) plotted six months ahead.

Alexandros Yfantis
Alexandros Yfantis
Fascinated by financial markets, studied International Securities Investment and Banking in the UK, works as a Portfolio Manager in Greece and runs a technical analysis website. Enjoys travelling and spending time with his family and preparing for the black belt in Korean Karate.