Very often we can get stuck while looking at only one timeframe, especially intraday. The CME Euro futures contracts have shown a strong pattern of higher highs and higher lows on intraday charts since the low was established on February 2nd.

An examination of the daily chart shows that this was rallying directly into resistance. In fact, the pattern provides perfect Gartley resistance from 1.3790 to 1.3861. I’ve indicated this pattern with trendlines below:

Click on image to enlarge!

As price was challenging this resistance zone on the daily, stepping down to the intraday charts can provide a clue as to whether we’ll see a breakdown or a continued pattern of higher highs/higher lows. Yesterday’s 15 minute chart provided a strong indication of a breakdown to come.

Click on image to enlarge!

As a form of a Head and Shoulders reversal pattern, the Crown provides very specific Fibonacci levels as an alert that there’s a greater likelihood of a strong downside move than with a traditional Head and Shoulders. Price comes down to the 1.272 target extension of the swing into the high then starts to rally. The emphasis is placed on the .618 retracement resistance from the major high to the low at the 1.272 target. Signs of a hold here serve as an early alert that a reversal is likely to take place. In fact this was posted early yesterday morning on my Chart of The Day page, well before the initial short side triggers.

Again though, the key is that the higher timeframe resistance gave us a heads up that it was time to look for signs of a reversal on the shorter timeframe. With both daily and intraday charts showing very specific Fibonacci based patterns resistance patterns, the probability of successful short side trades became very clear. This is Market Geometry in action!

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