Stock of the day: CME Group
24 May 2023
The reversal witnessed with indices yesterday justifies the exploration of more bearish setups in the current market environment. One particularly compelling setup can be observed on the CME chart which is relatively fresh, as it formed just yesterday.
CME has been following a consistent down-trend since February 2022. Initially, there was a sharp drop, followed by a corrective phase in a shape of a triangle formation (highlighted in red on the left side of the chart). Subsequently, another decline occurred, followed by a correction in a form of a flag pattern (highlighted in red on the right side of the chart). In April, the flag pattern reached a local peak when the price touched the upper line of the flag, the long-term down-trend line (blue); and encountered horizontal resistance at $195.
Since then, the price has predominantly been trending lower. Yesterday, sellers successfully breached the lower line of the flag formation, and thereby concluding this pattern and, theoretically, initiating a new bearish wave. This serves as a sell signal which was mentioned in the outset of this analysis. The bearish sentiment is expected to persist as long as the price remains below the blue trendline.