5 bearish signals that show DXY uptrend terminated
In these 2 charts below, 5 technical analysis concepts are involved:
- Boxes showing price action by period, as well as high and low
- Moving averages as a directional roadmap
- Moving averages as a support/resistance
- Chart patterns
- 52-week low
5 bearish signals are visible for the Dollar Index DXY.
Chart #1 – DXY weekly candlestick chart from May 2014 to present
Concept #1 – Bearish quarterly action
Coloured boxes in this chart show quarterly price action. Green boxes show quarters that close higher and pink boxes show quarter that close lower.
Q1 to Q3 boxes this year print lower highs and lower lows that shows DXY in quarter to quarter downtrend. This is a bearish sign #1.
Q4 is trapped inside Q3. Although it is green so far, the quarter hasn’t ended so it can go in any direction. Based on action till date however, Q4 box is trapped inside Q3. If you change these boxes to candles, then the quarterly candle at this moment is an inside candle. Unless we see an bullish expansion, at best Q4 is a consolidation. DXY is more likely to continue the last 3 quarters’ bearish trend than to do a reversal here.
Here’s a simple guide to boxes in your analysis.
Concept #2 – Bearish moving average roadmap
I use a 4-line exponential moving average roadmap. These are:
- 13-week ema that shows quarterly trend.
- 26-week ema that shows half-yearly trend.
- 52-week ema that shows year to year trend.
- 104-week ema that shows 2-year trend.
There is a previous post on this topic here.
Clearly visible in this DXY chart above is the cluster of death crosses in the moving averages (inside red circle). Death crosses point to a reversal. The moving averages are also point down. This is bearish signal #2.
Concept #3 – Moving averages now acting as resistance
This is a well established concept. During the uptrend stage of DXY between 2014 – 2016, the same set of moving averages acted as support. Now they have become resistance.
DXY already got resisted by the blue line (26-week ema) twice (see red arrows). This is bearish signal #3.
Maybe at some point in the near future, a bullish development might push DXY up to a higher line, maybe not. Point is the moving average lines are now resistance so it is easier for DXY to move down then to go up.
Chart #2 – DXY weekly line chart from May 2014 to present
Concept #4 – Head and Shoulders chart pattern
A Head and Shoulders chart pattern by itself is bearish. Line chart now shows a Head and Shoulders chart pattern in Q4.
A Head and Shoulders chart pattern nestled against a resistance roadmap (see concept #3) is doubly bearish. This is bearish signal #4.
Concept #5 – New 52-week low back in Q3
52-week lows are strong supports. The previous one was in place for 2 years so it’s a pretty significant one. It was broken in Q3 so DXY now has a new 52-week low. A new 52-week low says that the previous uptrend has been terminated. This is bearish signal #5.