On the daily chart below for the
Russell 2000, we can see that the price broke out of the trendline last Friday and the bearish
momentum may increase in the following days.
The 50% Fibonacci
retracement level acted as a strong resistance and coupled
with the trendline as support the price action formed an ascending
triangle pattern that has now been broken. Generally, when the price breaks out
the momentum increases, so we may see the price falling all the way back to the
previous swing low support at 1731.
On the 4
hour chart below, we can see more clearly the triangle pattern and the
breakout. The price broke out last Friday as US
PMIs beat expectations across the board. This may be good news for the
buyers, but the market seems to be worried of a persistently hawkish Fed as the
details about inflation in the report were not encouraging.
On the 1 hour chart, we can see
that the price has been ranging between the Fibonacci retracement level and the
1780 support. The sellers may want to see the price to break below the support
to confirm the bearish bias as this breakout of the trendline may turn into a
fakeout.
The buyers, on the other hand,
are likely to lean on this bottom of the range to target a rally towards the
Fibonacci retracement level. The next key economic reports will be released at the end of
the week, so the technicals should lead in the meantime.
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