On 17 Dec 08 Soybeans made a double top just below a significant resistance level. The following two days were inside days where the market was “deciding” on where to go – up or down.The resistance level seemed very strong; the double top was just below the 50% retracement to the previous top, and the current 3-day upswing had lasted half as long (again, the famous 50%) as the previous 3-day upswing. And let’s not forget that the overall trend was down.
However the Soybean market did break through the resistance level and has to date rallied upwards. This is a great example of how a market can rally after it has broken through a significant resistance level.
As a trader one should not care whether it was heading up or down. If the top had been confirmed one could have been fairly confident in taking a short position. However as the market broke through the resistance level one could have been confident in taking a long position, which subsequently has been proven to be a very profitable trade.
Soybeans rally