Stocks Suffer Critical Blow Today, RUSSEL 2000! (IWM)
Hi friends! Welcome to this analysis on the Russel 2000, via the IWM ETF! Let's get right to it! Looking at the daily chart, you can see that the IWM has been trading inside of an enormous rising wedge, since the election of President Trump. There has been a nearly 70% rise, since election night, but a major shift is beginning to take place. Since September of last year, IWM has been in the process of forming a large head and shoulders. Additionally, you can see that in February, the trough between the head and the right shoulder was formed, which produced several violations of the bottom of the rising wedge, and even the 200 EMA (in purple.) Since then, IWM was able to rally back to the upside, but only to roll back over to form the right shoulder. Volatility has also been increasing, and the overall action looks like a top that is forming in the market.
Today's action increased the bearishness, as IWM was able to close well below the rising wedge, and even slightly below the 200 EMA (in purple.) So there is a good chance of further downside in the coming sessions, which could easily complete the right shoulder in this head and shoulders formation. With that said, I'd like to draw your attention to the price extensions below the current price action. The fine black dotted trendline shows the target projection for the rising wedge, and the dashed trendline, shows the target projection for the head and shoulders formation. Interestingly both of them are converging on the same area, around 123. When multiple formations project similar targets, it increases the probability that those targets will be reached.
On the MACD, you can see that it has fallen below zero, which is a technical sell signal, and it's continuing to expand to the downside. Additionally, sell-side volume is dominating the chart, so the bears appear to be gaining control. After today's critical blow (closing below the 200 EMA) I'm looking for a continuation selloff to complete the formation of the right shoulder. From there, I'll be looking for a breakdown in IWM, that sends prices at least to the 130 level, and possibly as low as 120.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! I'm outta here!
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-Magic loves you-
-JD-
Today's action increased the bearishness, as IWM was able to close well below the rising wedge, and even slightly below the 200 EMA (in purple.) So there is a good chance of further downside in the coming sessions, which could easily complete the right shoulder in this head and shoulders formation. With that said, I'd like to draw your attention to the price extensions below the current price action. The fine black dotted trendline shows the target projection for the rising wedge, and the dashed trendline, shows the target projection for the head and shoulders formation. Interestingly both of them are converging on the same area, around 123. When multiple formations project similar targets, it increases the probability that those targets will be reached.
On the MACD, you can see that it has fallen below zero, which is a technical sell signal, and it's continuing to expand to the downside. Additionally, sell-side volume is dominating the chart, so the bears appear to be gaining control. After today's critical blow (closing below the 200 EMA) I'm looking for a continuation selloff to complete the formation of the right shoulder. From there, I'll be looking for a breakdown in IWM, that sends prices at least to the 130 level, and possibly as low as 120.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! I'm outta here!
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-Magic loves you-
-JD-
