NEW YORK (TheStreet) -- It's tough to trade a situation like the Greece crisis, because the headlines and the posturing in the negotiations are constantly changing and often surprising. Emotions like fear can creep into investors' heads, too, as they worry what a Greek exit from the eurozone would mean for global markets.
This monthly bar chart shows the peak in early 2014, after a choppy rise off the last Greece panic and bailout. The stochastics reached above the 90% overbought threshold in late 2013, dipped back below it in January 2014, then bearishly diverged with a lower high against a higher high in price at the March 2014 price peak, rendering a bearish-divergence sell signal.
Augmenting this technical condition is the multiple bumps that prices made against the upper two-standard-deviation band (gold line). The final high in price diverged from the band and didn't touch it as it had on several previous attempts.
These two warnings of waning crowd participation, according to the Decision Support Engine, were harbingers of the trouble in the making, and price has fallen 62% from that high to the low this week.
However, as can also be seen, the opposing condition is setting up now, as the current stochastic low is higher than the extreme low that was seen in January, while the ETF recently made lower lows than at January's extreme. This is setting up a bullish divergence of positive sentiment vs. emotional price behavior exhibited by the crowd.
If prices hold above Monday's $9.40 low, the chart will also show a low in price that hasn't touched the lower two-standard- deviation band (gold line), in a mirror image of the sell signal at the January peak. This would generate a bullish-divergence buy signal. The blue arrows show two possible paths of very short-term price action, which both meet at the $18, plus or minus $1, zone in the next five to eight months.
At the 2014 peak, the crowd was nearly certain that all was well in Greece, and the crowd was proven wrong. Now, it seems like doom is the mood of the month. However, an objective case can be made that the next move over coming weeks to months should be higher, even if the next move in coming hours to days is lower. This presents an opportunity to ask the decision support question: "If I had no capital in this market, would I take a buy or sell action, or none at all?"
If trying to buy low and sell high, the current condition suggests avoiding sell actions here (as they were implied at the 2013/2014 highs), and considering buy actions (as they are implied this/next week). If you were buying then and are considering selling now, you might want to evaluate the amounts of emotion and subjectivity in your strategy.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.