Have small caps and sectors entered the bear market?
Small-Cap Russell 2000 index
Russell 2000 index
Lately, I have been getting a lot of questions and concerns from traders about the small stocks and their so-called bear behavior
So I will go ahead and say I do not usually trade specific stocks as you probably know
Just one thing everyone forgets - that there was a movement of over 50%, in a very short period of 4 months, from November last year that the index stood at around 1600 points And reached a peak in early March of 2370 points
So let's go check out the big picture that is their metric
major indexes in the USA failed to reflect how bad it was for many small stocks.
Small caps and sectors like clean energy, solar, bio, cannabis, and other favored names from a couple of months ago, are trading like they are lost their trend and suffer major losses - in this sector became bear market?
Most analysts seem quite confused by the action. On one hand, the S&P 500 and Dow Jones industrial average look downright frothy, but the action in many individual stocks is putrid.
let's not forget that the major run that we saw in those stocks came fromThe social media traders who enjoyed great speculative trading two months ago are now suffering severe damage.
The indexes look like they are unsustainable, while many individual stocks are down 50% or more from their highs.
This is an interesting trading environment behavior that the senior indexes don't fully reflect whats happening in small caps
time will tell who is right
Russell 2000 index analysis |
let's examine the Russell 2000: we can see Diamond Chart Pattern
Diamond chart pattern can signal a reversal of an uptrend or downtrend
As its name implies it is diamond-shaped
Diamond Top Reversal Signals if it’s on the top
Diamond Bottom pattern Signals if it’s on the Bottom
Diamond tops typically form at the end of an uptrend which makes a signal for a reversal- It represents a rally to a new high with a drop to a support level followed by a rally to make a new high and a quick decline, breaking the support level to make a higher low. The bounce from the higher low is then followed by a rally, but making a lower high instead. Once this behavior is identified, prices then break the trend line connecting the first and second lows and start to decline further.
In the case of a diamond bottom, prices follow the same pattern but instead make a new low and a new high followed by subsequent higher low and lower high.
It is worthwhile to follow the formation of the pattern, and if it is implemented we have a target of 200 + _ points here - This means that breaking the pattern down will lead to the 1880-1980 area - need to watch closely on 2030-2040 area !, When on the other hand breaking the pattern up will lead to area 2480-2510
Russell 2000analysis |
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