Pullback to Major Harmonic level @ 7562 – further downside could test the 7k zone
The pullback to the 7562 value area was no unexpected. In fact, this was something we have discussed over the past week. The move itself is actually a positive sign of some profit taking and evidence of a return to some liquid trading. This should only improve as we get closer to September and October.
The thick, green horizontal line represents the 3/8th Major Harmonic value of 7562.13. This particular value acts as the lower trading range between 7562.13 and the 4/8th Major Middle Harmonic of 10082.5. No matter what chart we look at, prices will always like to trade 30-40% of their time between these harmonic values. What we also should observe is the natural channel that is being formed on the upwards trending Gann Angles inside this square of 144. It is very possible that the pattern price will want to follow is one of ‘ping-ponging’ against these angles. If that’s true, then this is the scenario that we should see play out:
If price continues to fall further, then we could see a choppy trade all the way down to the $7000 – $7200 value area before finding a small support zone at the inner 7/8th harmonic (yellow horizontal line). Prices may consolidate for a day or two around the 7th-8th of August. the 8th of August has a strong confluence zone of 2 Gann angles and the inner 7/8th harmonic. This is a natural area that is difficult to cross above or below. It is entirely possible that we could see some sneaky maker bear traps played by having a small push below that zone towards the $6900 value area. However, there is a higher probability of prices reacting swiftly to these angles and the 7/8th harmonic by driving higher – first pausing again at the Major 3/8th and then finally blowing through higher towards the 8800 zone.
I do need to note that the VPOC (Volume Point of Control) is right on the Inner 1/8th harmonic of 8192. The VPOC is a strong level of support and resistance. It is also a zone that price does not like to deviate very far from. The VPOC represents the most volume traded at a particular price. In other words, the 8192 value area is where the most volume has traded between Thanksgiving of 2017 to today (July 31st, 2018). It is the most difficult price zone to cross and stay above on this chart. I will keep repeating this until I am blue int he face: the 10k value zone is not important and more than likely will not face significant resistance. The 8192 value zone is the hardest to cross.