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Chart Art: Double Bottom Patterns on S&P 500 Index & NZD/JPY

October 18, 2022| Forex Market

On the lookout for reversal setups?

I’ve spotted a couple of these on the 4-hour charts of the S&P 500 index and NZD/JPY!

Better keep these levels on your radar:

NZD/JPY 4-hour Forex Chart

NZD/JPY 4-hour Forex Chart

Don’t look now, but NZD/JPY is already breaking above its double bottom neckline!

This means that the pair is in for a reversal from its downtrend, possibly climbing by the same height as the chart pattern or roughly 300 pips.

Price is even busting through the 200 SMA dynamic inflection point, which clears the path for a move towards the 87.00 handle next.

But before y’all rush in any long positions, just be mindful that technical indicators are still reflecting bearish vibes.

For one, the 100 SMA is below the 200 SMA to signal that selling momentum is still in play. The gap between the moving averages is even widening to indicate strengthening downside pressure.

In addition, Stochastic just reached the overbought zone to show that buyers are exhausted.

Turning lower would mean that sellers are regaining the upper hand and could take NZD/JPY back down to the lows at 81.00.

S&P 500 Index (SPX500) 4-hour Chart

S&P 500 Index (SPX500) 4-hour Chart

Now this reversal play on the S&P 500 index might take some time before playing out.

The equity index is just about to complete its double bottom formation by making another test of the neckline at 3,800.00 and breaking higher.

If that happens, we might just see a rally that’s the same size as the reversal pattern!

On the other hand, if resistance holds again, the S&P 500 index could tumble back down to the 3,600.00 mark or lower.

As you’ve probably noticed from the chart above, the neckline coincides with the 200 SMA dynamic inflection point, which adds to its strength as a ceiling.

Also, the 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside. To top it off, Stochastic is closing in on the overbought territory, suggesting that bulls need a break.

Do you think risk-on flows might favor more gains for U.S. equities?

Or are we about to see another leg lower for higher-yielding assets?

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