Hi friends! Welcome to this update analysis on the Russell 2000, via the IWM ETF! Let's get right to it! Looking at the daily chart, you can see that the IWM is continuing to run into trouble as anticipated. The head and shoulders formation (in red) is continuing to develop, as anticipated, and we can see that the right shoulder is forming a head and shoulders pattern inside of itself. Since there is a head and shoulders formation building in the right shoulder, a breakdown to the neckline is increasingly likely.
If you recall from my last post, I was covering the bearish rising wedge, which is defined by the top of the channel and the rising blue trendline. You can see that it has recently been violated on several occasions. So, the rising wedge has been heavily weakened as support, further increasing the likelihood of a completion of the right shoulder on the large head and shoulders formation.
You can see that I still have the downside projections up, which were generated with the size of the bearish rising wedge and the head and shoulders formation. Both of those projections indicate a severe breakdown, but I've realized that there is potentially an invisible support level in the way — the bottom of the parallel channel. Now, I realize that you need at least two points of contact, preferably three, to form a good trendline. However, this is the type of forward thinking that can really pay. With that said, there is a chance that IWM breaks down, but only to the bottom of what would form a perfect parallel channel. Depending on how rapidly that occurred, that could put us in the 135-136 area. Regardless, the head and shoulders and the bearish rising wedge are projecting a breakdown below what would be the bottom of the parallel channel. So, that level may or may not hold, but it is DEFINITELY something to be cognizant about. With that said, I expect further downside in this market, resulting in a completion of the head and shoulders formation. The 50 EMA (in orange) should continue to act as overhead resistance.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir! ;)
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-Magic loves you-
-JD-
If you recall from my last post, I was covering the bearish rising wedge, which is defined by the top of the channel and the rising blue trendline. You can see that it has recently been violated on several occasions. So, the rising wedge has been heavily weakened as support, further increasing the likelihood of a completion of the right shoulder on the large head and shoulders formation.
You can see that I still have the downside projections up, which were generated with the size of the bearish rising wedge and the head and shoulders formation. Both of those projections indicate a severe breakdown, but I've realized that there is potentially an invisible support level in the way — the bottom of the parallel channel. Now, I realize that you need at least two points of contact, preferably three, to form a good trendline. However, this is the type of forward thinking that can really pay. With that said, there is a chance that IWM breaks down, but only to the bottom of what would form a perfect parallel channel. Depending on how rapidly that occurred, that could put us in the 135-136 area. Regardless, the head and shoulders and the bearish rising wedge are projecting a breakdown below what would be the bottom of the parallel channel. So, that level may or may not hold, but it is DEFINITELY something to be cognizant about. With that said, I expect further downside in this market, resulting in a completion of the head and shoulders formation. The 50 EMA (in orange) should continue to act as overhead resistance.
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir! ;)
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-Magic loves you-
-JD-