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Confluence of Resistance for RBS

RBS has been moving lower since March on the daily chart in figure 1.

Figure 1

There are some indications that this downward move is over: the three gaps highlighted may be considered a sign of trend exhaustion. The bullish divergence on the RSI echoes this sentiment. I’m more interested in the area of resistance the market ran into on Friday (the second most recent candlestick).

Firstly, observe how the market has reacted to the 0.382 trendline of the Fibonacci fan shown in figure 2.

Figure 2

It has tested and responded to the descending trendline 3 times before not validating it as a solid resistance. When it returned to for the 4th time on Friday, it did so on extreme volume over double the 20-day volume moving average. This could suggest it was a ‘buying climax’ and that a reversal is probable. This level is given even more resistive significance by the concurrent 100-day moving average shown in figure 3.

Figure 3

Further adding to the reversal case is the Fibonacci extension levels shown in figure 4.

Figure 4

These are not extensions of a price range. They’re extensions of a gap range. The retracement tool is applied to the most recent gap as measured from close to open. The resulting levels show that Friday’s high came right on the 2.618 extension. As it happens, the 2.618 extension of the gap also coincides with the 4.236 extension of the bottom consolidation, as shown in figure 5.

Figure 5

This degree of confluence carries serious significance. That being said, if the downward move it complete, the reversal from this resistance will be short-lived. This is a very interesting chart to keep an eye on.

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