The start of the year was not very pleasant for the US equity markets. The latest drop in the value of the major US indices was induced by adjusted expectations on the effects of “higher for longer” interest rates in the US. Namely, the US economy is standing relatively good with a still strong jobs market. The US added 256K jobs in December, which was strongly higher from market expectations. At the same time, the unemployment rate dropped by 0,1 percentage points, to the level of 4,1%. These figures are absolutely good for the US economy, however, they did not make investors happy. The tricky part is that the market is now expecting that the Fed will halt further decrease of interest rates, where some analysts are noting the potential for the first 25 bps cut in September this year. The environment of still increased interest rates will not support the growth of US companies, especially small-caps, in a way that the market has previously estimated. This was the initial premise, based on which, the S&P 500 ended the week lower, reaching the level of 5.827 on Friday. At this moment the main question is whether the market will continue with a correction, or is it now a good time to buy the dip? Probably some higher volatility is expected around and on the day of the FOMC meeting in January, when investors will get additional information regarding the course of the US interest rates from FED officials. This date will set the course for the rest of the year. Still, during this period some higher volatility is possible. In technical analysis there is a clear line which connects bottoms on a 1D chart, from October 2023, then bottom in august 2024 and current bottom at Fridays levels. So, charts are noting, if this level is sustained during the next week or two, then the market will revert back to the upside. In case that current levels are breached toward the downside, that should be an indication of a higher correction in the future period.
Bitcoin is about to make a strong comeback, showing signs of an imminent bullish rally
The major data posted during the previous week were related to the US jobs data. The surprisingly better than expected Non-farm Payrolls figures of 256K hit the market on Friday. The expectations were standing at the side of 200K. At the same time, the unemployment rate dropped to the level of 4,1%, from 4,2% posted during previous months. Average hourly earnings were increased by 0,3% in December, bringing the figure to 3,9% for the year. Another surprise came from the Michigan Consumer Sentiment preliminary for January. The Michigan 5 years inflation expectations were increased to the level of 3,3%, from 3% posted during the previous months. From other macro data posted during the week, the ISM Services PMI in December reached 54,1 a bit higher from 53,3 market consensus. Inflation rate preliminary for December in Germany reached 2,6% on a yearly basis, which was higher from market consensus of 2,4%. Inflation rate on a monthly basis was standing at 0,4%. Inflation rate in the Euro Zone flash for December was standing at 2,4% y/y and was in line with market expectations. The unemployment rate in the EuroZone in November was 6,3%, unchanged from the previous month. Factory orders in Germany continue to be under pressure with -5,4% m/m change in November. This was strongly below forecasted 0,3%. Retail sales in Germany in November were also surprising with a drop of -0,6% m/m while the market again expected to see a positive figure of 0,5%. The balance of trade in Germany in November managed to stay in a positive territory with 19,7B euros, which was much higher from market consensus of 14,8B euros. During the previous week, the strong strengthening of the US Dollar continued. The eurusd took the course further toward the downside, reaching the lowest weekly level at 1,0220. The historical support line at 1,04 has been easily breached. This represents a continuation of the move toward the parity, after the last defense line at 1,04 has been clearly broken. The euro Zone continues to struggle to sustain its modest economic growth, while the latest jobs data in the US showed clear resilience of the US economy toward the inflation and high interest rates. The RSI continues to move around the oversold market side for the last three weeks. There is no clear indication on the potential for a short reversal. The MA50 continues to diverge from MA200, without an indication that the convergence might start anytime soon. The markets set the clear course for eurusd in September last year. Now the main question is with which speed the markets will head toward parity? Current charts are pointing to some probability that the level 1,02 could be tested in the week ahead. However, it should be taken into account that December Inflation data for the US will be posted in the week ahead, which might bring back some volatility. The move toward the upside is possible, but it should be taken with a precaution. After posted jobs data, the market is currently in the sentiment that the interest rates will be “higher for longer”, in which sense, a demand for US Dollar might continue. Important news to watch during the week ahead are: EUR: Full year GDP growth in Germany, Inflation rate in Germany, final for December, USD: Producers Price Index for December, Inflation rate in December, Retail Sales in December, Building Permits preliminary for December, Housing starts in December
What is the reason for high gold price? According to market analysts, this steady rise in gold prices could be attributed to a combination of factors, including geopolitical tensions, changes in interest rates, and robust demand from key markets like India.
Markets were quite surprised by the latest strong US jobs data posted on Friday. It was interesting to watch the BTC chart during this period, because not only did traditional markets react in a negative manner, but also BTC had a strong drop toward the $93K levels. That is sort of confirmation that the BTC is officially part of the mainstream markets, and such volatility might be expected also in the future. However, trading week started in a pretty negative manner. The strength was weakening, as well as daily trading volumes. Investors are currently silenced, in expectation of a new US Administration on January 20th. The lowest level reached during the week was $91,4K, from which BTC rebounded. During the whole week, there has been higher volatility between levels of $93K and $95K. The $95K resistance line was tested on several occasions, but there has not been strength for higher grounds. The RSI currently moves around the level of 45, indicating that the market might easily drop toward the oversold market side. The MA50 is slowly starting its convergence toward the MA200, however, it is too early to speak about the potential cross. Current charts are showing a lower BTCs strength. In this sense, there might be some probability that the support line at $90K might be shortly tested for one more time. Still, the majority of trades occur around the $93K level, in which sense, this trend might continue for another week. The level of $95K holds currently as a strong resistance line. On a positive side is that on a daily chart Friday's trading season was in green, after the market tested the lowest level from Thursday. In this sense, the lowest level “was rejected” as it is usually said by technical analysts. This provides some positive sentiment, however, the trading volumes are currently quite weak, in which sense, a potential for higher grounds might be postponed.
Tcs positive, tcs trade 10,20, Day ema up , Tcs break before 2 weeks candle, And weekly support 4000.
I think it’s pretty clear we have avoided a recession (Jerome, Powell, 12/18/24). One last final high on the stock market before the recession is coming in my opinion.
The GBPCHF pair is currently testing a key demand zone, where previous price reactions suggest potential for a bullish reversal. This area has historically been a support level, indicating that buyers could regain momentum at this juncture. A confirmation of bullish sentiment, such as the emergence of a bullish candlestick pattern or a strong rejection wick, would reinforce the likelihood of a rebound. Should this scenario unfold, the price could target the 1.12417 level. What are your thoughts on this outlook?
How Do Traders Identify Overbought and Oversold Stocks? Identifying overbought and oversold stocks is a key part of technical analysis for traders. These conditions occur when a market’s price moves to extremes—either too high or too low—compared to its recent performance. By recognising these signals, traders can spot potential turning points in the market. This article explores what overbought and oversold stocks are, how to find them using technical indicators, and the risks involved in trading them. What Is an Oversold Stock? https://www.tradingview.com/x/utrTNDyB/ Oversold stocks are those that have experienced a significant price decline, often beyond what might seem reasonable based on their underlying value. This often happens when market sentiment is overly negative, even if the company’s fundamentals remain solid. Several factors can lead to a stock becoming oversold. For instance, bad news about a company, such as a missed earnings report or legal troubles, can cause investors to sell off shares quickly. Broader market events, like economic downturns or changes in industry regulations, can also drive prices down across the board. Sometimes, even strong stocks get caught up in these waves of negativity. The concept of overselling isn’t just about price falling, though—it’s about the potential for a reversal. When stocks fall too fast, too far compared to their actual financial performance or growth potential, this is where traders look for opportunities, analysing whether the market is poised for a potential recovery. What Is an Overbought Stock? https://www.tradingview.com/x/3UNRQewo/ Overbought stocks are those that have risen sharply in price, often to a point where they may no longer reflect the stock’s true value. When a stock is considered overbought, it means there’s been a lot of buying activity, pushing the price higher than what its fundamentals might justify. This often happens when market sentiment is extremely positive, driving demand even when shares may already be trading at high levels. Several factors can lead to an overbought market. Sometimes, positive news about a company—such as strong earnings, new product launches, or positive analyst reports—can spark a wave of buying. Market-wide optimism, particularly during bullish phases, can also lead to an overbought stock market. Speculative buying, where traders hope to capitalise on short-term price movements, can further inflate the price. Being overbought doesn’t necessarily mean the stock is due for an immediate correction, but it does suggest that the price may have gone too high, too quickly. The most overbought stocks are often viewed as being in a vulnerable position for a potential pullback, especially if there isn’t enough underlying support from the company’s financial health or growth prospects. Traders consider this an opportunity to sell stocks at potentially good prices. How Traders Find Oversold and Overbought Stocks with Indicators Traders use technical indicators to determine whether a stock might be undervalued (oversold) or overvalued (overbought) based on its price action. These indicators allow traders to assess whether a price movement has gone too far in one direction. Technical indicators are tools that use historical price and volume data to measure things like price momentum and trend strength. When it comes to finding overbought or oversold stocks, momentum oscillators play a key role. These oscillators measure the speed and magnitude at which an asset’s price is changing. If a market has been rising or falling too quickly, it could be a sign that it’s either overbought or oversold. Also, if a stock has moved too far away from its typical price range, it signals a possible reversal. Traders rely on indicators to determine when the price may be at an extreme, helping them find entry or exit points based on market conditions. Now, let’s break down some of the most popular indicators used for this purpose. Relative Strength Index (RSI) https://www.tradingview.com/x/L00NwWma/ The Relative Strength Index (RSI) is one of the most widely used overbought and oversold indicators. The RSI is a momentum indicator that gauges how fast and how much a stock's price is moving. It gives traders a visual signal of when a stock may have been pushed too far in either direction. RSI compares the magnitude of recent gains to recent losses to assess whether a stock is overbought or oversold. The indicator ranges from 0 to 100 and is typically used to evaluate whether a stock is moving too fast in either direction. If the RSI falls below 30, the stock is considered oversold, suggesting it could be undervalued and due for a bounce. If the RSI rises above 70, the stock is seen as in an overbought zone, potentially signalling a price correction on the horizon. While RSI can be helpful, it’s essential to look at it in the context of the broader market. For example, in a strong bull market, a stock might remain overbought for an extended period. Similarly, during a downturn, stocks can stay oversold longer than expected. Stochastic Oscillator https://www.tradingview.com/x/SoogrmA4/ The Stochastic Oscillator is another momentum indicator. It compares a stock's closing price to its price range over a certain period. The idea behind this indicator is that in an uptrend, prices will close near their highs, and in a downtrend, prices will close near their lows. The Stochastic Oscillator helps traders identify when a stock’s price has potentially moved too far in either direction relative to its recent range. It’s similar in principle to the RSI, except the Stochastic is considered more useful for detecting shorter-term reversals. It’s especially useful for identifying overbought and oversold conditions because it moves within a range — between 0 and 100 — similar to the RSI. The Stochastic Oscillator is made up of two lines: %K, which is the primary line, and %D, a moving average of %K. When these lines are above 80, the stock is considered overbought. When they are below 20, it’s considered oversold. Given its sensitivity, it’s common to see the Stochastic signals a market is overextended for a longer period when there’s a strong trend. This makes it more prone to false signals than the RSI or MACD indicator and typically more useful for trading pullbacks in a broader trend. MACD (Moving Average Convergence Divergence https://www.tradingview.com/x/F6vyHZGS/ The Moving Average Convergence Divergence (MACD) is another popular overbought and oversold indicator. Unlike the RSI, which focuses primarily on oversold vs overbought levels, MACD is more about trend strength and its direction. It shows the relationship between two moving averages of an asset’s price and can help identify potential shifts in momentum. The MACD consists of two lines: the MACD line (which is the difference between the 12-day and 26-day exponential moving averages) and the signal line (the 9-day moving average of the MACD line). When the MACD line crosses above the signal line, it indicates a potential bullish reversal. When it crosses below, it signals a bearish reversal. Since the lines are based on the difference between two EMAs, it’s also possible to gauge an overbought/oversold stock by examining the distance of the lines between their current values and the 0 midpoint. If the lines are far away from 0 and their historical averages, it could indicate a stock is overbought or oversold. However, generally speaking, MACD is less about pinpointing specific overbought/oversold levels and more about identifying when momentum is shifting. A rapid crossover of the lines, especially after a strong move, can signal that a reversal might be near. Considerations When Using Momentum Indicators While momentum indicators like the RSI and MACD can be useful for spotting overextended stocks, there are a couple of key points to keep in mind when using these oversold and overbought indicators: Divergences https://www.tradingview.com/x/F6vyHZGS/ A divergence occurs when the price moves in the opposite direction to the indicator. For example, if a stock is making higher highs but the indicator is making lower highs, this can signal weakening momentum and a possible reversal. Divergences offer another layer of insight, so it's worth paying attention to them alongside other factors. Timeframes Different timeframes can produce different results. An indicator that shows a stock is oversold on a daily chart might not show the same on a weekly chart. It's important to choose the right timeframe for your trading strategy, whether short-term or long-term. Generally, many traders take a top-down approach, allowing higher timeframe signals to better inform your analysis on lower timeframes. Risks of Trading Oversold and Overbought Stocks Trading oversold and overbought stocks can be appealing, as these conditions often suggest a potential reversal in price. However, there are some risks to consider when relying on these signals. A few important points to bear in mind include: - False Signals: Just because a market is oversold or overbought doesn’t guarantee a reversal. Prices can continue to decline or rise despite what momentum indicators suggest. Traders need to be cautious about assuming that every extreme condition will result in a price correction. - Extended Trends: In strong bullish or bearish trends, a stock can remain in overbought or oversold territory for longer than expected. This can lead to premature trades, where investors get in too early or expect a reversal that doesn’t come for a while. - Market Sentiment: Sometimes, external factors like news events or broader economic conditions can overpower technical indicators. If there’s overwhelming optimism or pessimism in the market, a stock may continue in its overbought or oversold condition for longer than anticipated. - Lack of Confirmation: Relying on a single indicator can be risky. It’s common to use multiple indicators or combine technical and fundamental analysis for a more balanced view. There may be no other supporting signals when a stock is oversold, meaning the trade carries higher risk. The Bottom Line Understanding overbought and oversold stocks, along with the indicators used to identify them, can help traders spot potential market opportunities. While these conditions may signal a reversal, it’s important to recognise there is no one best overbought and oversold indicator and use multiple tools for confirmation. Ready to apply these insights? Open an FXOpen account today to access more than 700 markets, including a huge range of stock CFDs, and four advanced trading platforms. FAQ What Is Overbought and Oversold? Overbought and oversold are terms used to describe extreme price movements in markets. A stock is considered overbought when its price has risen rapidly and above its underlying value, which potentially makes it overvalued. It’s oversold when the price has fallen sharply and below its underlying value, which makes it undervalued. These conditions can signal that a price reversal may be coming, though they don’t guarantee it. What Does It Mean for a Stock to Be Overbought? The overbought stock meaning refers to a stock that has increased quickly and is potentially trading higher than its actual value. This often occurs due to strong demand or market optimism. Overbought conditions might signal that the price is at risk of a pullback. What Does It Mean When a Stock Is Oversold? The oversold stock meaning refers to a stock that has dropped significantly and may be below its true value. This often happens when there’s been excessive selling, and it could suggest that its price is due for a rebound. How Can You Find Oversold Stocks? Traders often use technical indicators like the Relative Strength Index (RSI) to find the most oversold stocks. An RSI reading below 30 typically suggests that a stock is oversold and may present a buying opportunity. Other indicators, like the Stochastic Oscillator, are also commonly used to identify oversold conditions. 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Gold trading insights: Not signals, but informative zones to aid your decision-making. Please note: These zones are not trading advice. Use them as a starting point for your own analysis.