Time to short the Russell 2000 ETF IWM, and here's why.
Here is a chart of the entire IWM ranging behavior over the past like 9-10 months. You can clearly see the resistance and support lines. The top resistance line also coincides with the R1 monthly pivot resistance line.
Below is the OBV with the same ranging behavior over the same time span. Obviously, volume should confirm price.....and up until recently it more or less has, also ranging up and down between the support and resistance lines drawn on the OBV indicator itself.
My point is...... look at the far right, where the purple rectangle boxes are. See the problem? OBV has already plowed downward well out of the rectangle and below the support line. Notice how it also never confirmed the prior IWM break out of the range. It was a leading indicator there that the break out would fail.....and it did.
Now it's clearly indicating that IWM is going to blow right through that rigid support line it's bounced off of many times before. My money is betting on that it's right.
Below is the OBV with the same ranging behavior over the same time span. Obviously, volume should confirm price.....and up until recently it more or less has, also ranging up and down between the support and resistance lines drawn on the OBV indicator itself.
My point is...... look at the far right, where the purple rectangle boxes are. See the problem? OBV has already plowed downward well out of the rectangle and below the support line. Notice how it also never confirmed the prior IWM break out of the range. It was a leading indicator there that the break out would fail.....and it did.
Now it's clearly indicating that IWM is going to blow right through that rigid support line it's bounced off of many times before. My money is betting on that it's right.
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Unfortunately I was right about this, and IWM just crossed beneath the support line that has served so valiantly to backstop bearish falls up until this point. Perhaps it'll bounce, and I'd wait a couple percentage points (and a daily close outside of the channel) before considering abandoning any holdings.
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And there she goes below the support line that's held so valiantly for over a year. We may see a retest back up to that line from below, but don't jump the gun and go long. It's likely going to flag lower.