IWM Price Channel At Critical Decision Point: Melt-Up Vs. Top
Trader Moe | Oct 29, 2014 01:26AM ET
iShares Russell 2000 Index (ARCA:IWM) has a confirmed price channel (bright blue on chart) that has reached the critical decision point.
Either it immediately reverses and breaks out the channel bottom to form a sideways move across the orange megaphone VWAP at roughly 112.50, or it makes a partial retrace into the channel and then breaks out the top into a melt-up channel.
The melt-up target would be a small breakout through the orange megaphone top. If instead IWM puts in the sideways move and breaks out the bottom, IWM is legal for a breakout through the orange megaphone bottom—the kind of breakout that just keeps moving.
IWM could also form a megaphone here and then break out upwards from it with a target of the orange megaphone top.
IWM Gray 1-Year Megaphone
A downward breakout from the orange megaphone would also be a downward breakout from the gray megaphone on the chart above that has been forming since late last year.
An eventual upward breakout from the orange megaphone would establish a new large price channel on the IWM chart, one that’s been forming for five years (purple on chart). The next upward target would be the channel top, which would mean another new all-time high.
But the turn on the bottom of a potential five-year price channel, and then the forming of a new short-term price channel, suggest low volume and technical trading rather than real emotion or fundamentals.
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