The
stochastics indicator is usually used as an overbought or oversold indicator.
However, it has its weak spots like when the price of the underlying asset
stays in a sustainable trend, while the indicator is trapped between the 100%
and the 0%. On the daily chart of the NZD/USD we can see just that; while the
price of the pair has kept a very good bullish trend, the indicator has gone
above the 80% line, but it is not able to keep rising above the 100%, especially
if the price of the NZD/USD breaks above the 0.7100 level. In case of a
breakout, the next resistance on the pair is at the 0.7200 level. In case of a
bearish bounce from the 0.7100 zone, its closest support is at the 200 day EMA
(blue line) at the 0.7034 level. In theory, the price of the asset may continue
rising indefinitely, but not the stochastics indicator and that is the weak
spot that the indicator has. The stochastic indicator works well in a trending
market, but it stops working when the trend is kept for a long time. Below the
200 day EMA, the NZD/USD has practically the road clear to drop all the way to
the 0.6900 zone.
It found some resistance at 0.7120.
ReplyDeleteLet's see what effect the NFP will have on it.
ReplyDeleteWe may see a pullback before another move upward.
ReplyDeleteGood to know it, thank you for shairng!
ReplyDeleteThank you for the relevant information.
ReplyDeleteGood to know, thanks!
ReplyDeleteVery helpful and insightful analysis, excellent.
ReplyDeleteGood point! I´ll be watching to those levels.
ReplyDeleteGood point.
ReplyDelete