This means that the recent price low (1252) is unlikely to act as any kind of significant support level, and we’re more likely to see more downside in the short term. Given this oversold position, potential longs may want to consider selling GBP/UsD at current levels.
A consolidation phase is an intermediate market condition where prices are consolidated between a downtrend and the start of a new uptrend. Fundamentally speaking, stocks with above-average volume should be trading closer to their original highs than below their lows on low volume. Low volume usually means that buyers are exhausted, and can only buy at (or close to) the current market price. Therefore, it is potentially a good time to sell a stock, or at least reduce your position size.
Additionally, if the news is not positive for the stock price, it may mean that the battle between bulls and bears has been won by one side (i.e. when there are only a few buyers left). In this situation, it’s possible that all sellers will get exhausted (the bears), and cause prices to drop even lower in an extremely rapid move down.
This is a representation of and commentary on the difference between fundamental analysis and technical analysis as it relates to price action. You may recall that technical analysis was about finding patterns in price and improving your trading skills by using those patterns. But now, you’ll see that fundamental analysis, which is the study of a company’s business strategy and financial data, has become essential in determining where a stock will move next.
You need both forms of analysis if you want to be successful at trading. To get the best results possible, abandon your old rules and become an expert in both forms of analysis.
The price is higher than the support level?
Yes. This is a representation of how the markets typically act. The more oversold a stock becomes, the more likely it is to move lower.
Is there any other advice you can give me? First, consider selling at current levels while there’s little resistance and much support. Gamblers will likely see this as a good time to short GBP/USD and will pay close attention to all news relating to the company.
Second, if you’re looking for any possible reasons that might cause this situation in GBP/USD it could be the fact that economic data seems to have been worsening in recent years. Many stocks will move lower when the economy is in a recession because investors want to take profits on their positions before the economy gets worse.
Third, it could be something as simple as negative news about a company’s business (such as bad earnings or a negative outlook). This is especially likely to happen if the stock price has reached low levels.
Is this definitive proof that GBP/USD is going down?
No, this only shows how the markets typically act. It’s always possible that another event could cause GBP/USD to reverse direction, but this should not stop you from selling at current levels if you feel you haven’t profited enough already. You always risk losing all of your money when trading.
What is the most likely scenario in GBP/USD?
GBP/USD will likely move lower until the market decides to take profits and stop selling. This may happen if prices reach levels below the current support level (1252), or if a reversal pattern forms. However, there’s no reason to hold onto GBP/USD right now because it has likely deviated too far below its 200-day moving average and is likely in a very oversold position that should provide temporary support.
Is the market always going to be this volatile?
No, not at all. In fact, most times you’ll find price action indicating a chance for a sustained upward trend. For example, when prices are above the 200-day moving average (indicating the extent of an uptrend), lower lows and lower highs should typically follow. When prices are moving lower on some kind of news.
