- Posted by JC Parets on July 27th, 2015 at 12:02 pm
One of my favorite setups across markets are when prices make new highs, momentum does not confirm and then prices fall back below those former highs. Some people like to call these whipsaws, others call them failed breakouts, some call them bull traps, etc. Regardless of what you want to name them, the setups are great because the levels are usually so well defined.
Today we are looking at the Russell2000 exchange traded fund breaking out to new highs this year only to get back down to that former breakout level represented by the highs in March, June and December of last year. Let’s call it $121. This is a weekly chart so we can see how when prices broke out this year, they have remained above those former highs, but notice how momentum did not confirm and put in a bearish divergence.
When markets make new highs we want to see momentum putting in new highs as well. We use a 14-period RSI to represent momentum. In this case, not only did momentum not put in new highs to confirm the new highs in price, but RSI did not even hit overbought conditions. We’ve been making lower highs now for almost 2 years.
I don’t see any reason to be long the Russell2000 if prices are below $121. If we’re above that then $IWM is fine. The good news is that we have a very well-defined level, which to us is the most important thing. I would not be short $IWM if prices are above $121, but below that and shorts are fine in my opinion.
(Looking a bit more short-term, $IWM is down to the lows from March and May of this year so this is a big level. A break should have some bearish consequences so we’re watching this closely)
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When Do We Buy McDonalds?
Posted by JC Parets on July 23rd, 2015 at 1:03 pm
When you talk about stocks that we’ve wanted to stay away from for a long time, it’s hard not to think about shares of McDonalds. […]
How High Can Chipotle Go?
Posted by JC Parets on July 22nd, 2015 at 12:04 pm
On the surface, a chart of Chipotle shares might seem a little bit too messy to bother with, but in reality I actually think it’s […]
Is It Time To Buy Apple? Or Is It A Sell?
Posted by JC Parets on July 22nd, 2015 at 10:59 am
To get a better understanding of how to approach shares of Apple, we first want to start with a longer-term view and then work our […]
Where Are U.S. Treasury Bonds Heading From Here?
Posted by JC Parets on July 21st, 2015 at 3:02 pm
The obsession with when Interest Rates are going higher has been one of the most fascinating things to watch as a market participant over the […]
A Top/Down Look at Shares of Google
Posted by JC Parets on July 21st, 2015 at 1:07 pm
Google is a stock that will always hold a special place in my heart. Just one month after I originally started trading stocks, Google held […]
Here’s A Look At The U.S. Large-Cap Indexes
Posted by JC Parets on July 20th, 2015 at 11:00 am
For most of the summer I haven’t been writing much here on the blog. I wanted to take a little bit of time off and […]
BNN Appearance: Interest Rates and Apple
Posted by JC Parets on June 26th, 2015 at 11:56 am
This morning I was down at the Nasdaq Marketsite chatting with Frances Horodelski on Business News Network about U.S. Interest rates and Large-cap stocks. We’re […]
This S&P500 Chart Still Makes Me Nervous
Posted by JC Parets on June 1st, 2015 at 11:31 am
Whether we’re talking about sports or we’re talking about the stock market, it’s Defense that wins championships. Rather than focus so much on how high […]
How To Prepare For a Lower Rate Environment
Posted by JC Parets on May 23rd, 2015 at 10:48 am
How come no one wants to write a piece about how to prepare for lower interest rates? Why is it that all of the headlines […]
J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He is a 10-year veteran and Market Technician who actively manages money incorporating Technical Analysis and Behavioral Finance into his practice. JC’s work has been featured regularly on CNBC, Fox Business, Bloomberg, Business News Network, Wall Street Journal and Yahoo Finance among many other financial media outlets. More...
- Was That A Failed Breakout in Russell2000?
- When Do We Buy McDonalds?
- How High Can Chipotle Go?
- Is It Time To Buy Apple? Or Is It A Sell?
- Where Are U.S. Treasury Bonds Heading From Here?
- A Top/Down Look at Shares of Google
- Here’s A Look At The U.S. Large-Cap Indexes
- BNN Appearance: Interest Rates and Apple
- This S&P500 Chart Still Makes Me Nervous
- How To Prepare For a Lower Rate Environment
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