The Russell 1000 Index is showing lower high points below a falling trend line at the 1151 level. In the previous month we saw a huge move up from a support level of 1070. These two levels will be used now as indicators for the direction of the index in the future.
The new world of online trading, fintech and marketing – register now for the Finance Magnates Tel Aviv Conference, June 29th 2016.
On a monthly chart, this is increasingly looking like a bearish broken top formation, but in order for this to be confirmed, we need a break below 50 SMA (pink line on a Chart 1) 975 level. As long as the Russell 1000 holds above this level, the long term uptrend is not over.
A clear break above 1150 is needed for this to be a continuation wedge, as can be seen in Chart 1. So we have conflicting signals on a monthly chart and a big range. Traders have to watch the indicated levels and to trade a range as long as we don’t see a break above or below.
Meet BeSquare: the new tech training program for Malaysian graduatesGo to article >>
A look at the daily chart would certainly help range traders to set levels for SL and TP if they decide to trade a range, or if they decide to trade a break. In both cases recently they have great risk to reward setups.
An important level for the upside break is the 1150 level, until it is broken with a clean daily candle for the continuation up and long trade. As long as this level is holding range traders could take short positions with SL above this level.
I would say that traders have a clear picture of this situation, which is near a resolution. If the Russell 1000 Index breaks 1150 points higher decisively then we could see a trend continuation. On the downside, a break of the wedge would be confirmed by going below 1000 points.
Real breaking of this long term rising trend should come if the Russell 1000 Index goes below 975 points. Traders will be closely watching these levels in the coming days, weeks and months, and break of this wedge, either top or a bottom, would be the beginning of a huge move.