Charting the Emerging Market EEM Rally into Resistance Levels

Sep 1, 2011: 11:19 AM CST

What’s going on with the popular Emerging Markets ETF (EEM) and what are the key higher timeframe reference levels?

Let’s take a look, starting with the higher weekly structure which identifies the two main levels:

Cutting right the main point, major confluence support (Fibonacci and 200d SMA) resides at the $38.00 per share level – that’s also a confirmed price low for 2011.

On the upside, confluence EMA resistance (20 and 50 EMAs are crossing) rests at the $45.00 per share level.

These seem like a wide boundary area, but keep in mind this reflects the weekly frame key chart levels with respect to the recent increase in volatility.

For fun, we can see that a lengthy negative momentum divergence undercut the 2011 high into $50 per share, which was a warning sign/non-confirmation at the highs.

As the price attempts the $45.00 confluence, keep that level in mind with respect to the lower timeframe levels:

I drew a shorter term Fibonacci Retracement grid from the 2011 high to the 2011 low as labeled.

That places the 38.2% Fibonacci Retracement at $43.22 which is forming a confluence with the falling 50 day EMA at $43.66 along with the (lesser important) Upper Bollinger Band at $43.45.

In other words, these are key chart boundary areas to monitor on a short-term trading basis.

Keep this in context with the overhead weekly confluence at the $45.00 per share level.

What’s the main takeaway?

The $43.50 to $45.00 area serves as critical/key overhead resistance on the price chart and traders need to keep these levels in mind when positioning.

A firm breakthrough above $45.00 would be a major bullish development which would overrule/break these confluence resistance areas, but until that happens, it would be logical to expect a pause or short-term inflection from these levels.

Corey Rosenbloom, CMT
Afraid to Trade.com

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