In my November 4th article I wrote about how we were approaching a significant high in the CME Euro futures contract. Here’s a look at the current daily chart:

Click on image to enlarge!

We can see that the overlapping targets held and brought a significant decline. This drop landed just past our initial downside target, so it doesn’t “owe us” anything more to complete a downside pattern on this timeframe.

There’s another major factor to consider though if this should continue to rally. A break through 1.4098 would target the price extension at 1.4502. That would imply a break of stronger Fibonacci resistance at 1.4400. That’s a weekly .786 resistance factor as seen on this chart:

Click on image to enlarge!

As mentioned in the prior article, it’s actually a near overlap of 2 major resistance factors. A break through that area would call additional major upside targets into play. And while this may occur, it can also make for rough going for a continued rally until we actually see a break of that zone.

So how can a trader take advantage of the next leg of this rally? We’ll keep track of price action at major resistance points on the intraday chart. Here’s a 60 minute:

Click on image to enlarge!

The current upside target is a near overlap with the next major intraday resistance: 1.3703 – 1.3709. We should be able to see this Fibonacci combination met. The question is, will it break? If it does, the next highlighted area is also a close overlap between the implied target and additional resistance: 1.3860 – 1.3864. Short term intraday traders can use these zones as upside targets, with the second zone implied if the first one breaks. Traders willing to work countertrend would look for reversals at those points too, provided that a momentum based trigger or price action confirms that those levels are respected. Swing longs? Those targets are the danger zones on the way up and the trade should be managed at that point by evaluating stop placement according to your money and trade management criteria. After those resistance zones, keep an eye on the daily .618 and particularly the daily .786 resistance!

For more from Mark including his “Chart of the Day”, visit MJBraun.net.