Two things have presented itself:
- The breakout yesterday is legitimate as there was volume and it cleared the 1.66 level.
- The action today is a consolidation of yesterday's move. In short, a flag has presented itself and may be worth playing for the very short term.
If by chance, the level of 1.78 would be surpassed tomorrow and there is significant volume again, 1.80 would be deemed a buy, but only for tomorrow. Why? Because if we were to follow the progression and the typical construction of flags, the breakout is expected to be on the first trading day for 2008; Jan. 2. By that time, the resistance would be at 1.80, so we adjust the resistance and targets higher by one fluctuation.
For tomorrow, the target would be 1.90 if it breaks out tomorrow. But since we do expect the breakout to happen one trading day later, then a break of 1.80 is a buy with the near term target at 1.92.
Personally, I still like to get this at 1.68 but I believe that at this point, what with a flag being formed, I find that scenario highly unlikely. Of course, it now all depends on how the major global markets would perform prior to our market's action.