This chart looks at the Russell 2000 (Small Caps) going back the the late 1980’s.
As you can see, the index has stayed within rising channel (A) for the past 25 years. Over the past year, the index has hit the top of channel (A) and made little upward progress after hitting it numerous times over a year's time frame.
Rising channel (B) has been in play over the past 5 years. Last fall, the index at the “Ebola lows” did NOT break support of rising channel (B).
It wasn’t until the past few weeks that support line (B) was broken to the downside.
Last week at (1), the index looks to have made a reversal pattern (bearish wick) at the underside of rising channel (B).
Was this an awkward kiss of resistance at (1), creating a reversal pattern? Sure could be.
For the Russell index to keep pushing higher (continue sending bullish signals), it first needs to climb back inside channel (B).
Small caps would send a negative signal should further weakness take place under the 1,220 level.
Stay tuned friends, price action underneath resistance become pretty important!
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