Strength and Breakout for Emerging Markets EEM

Oct 7, 2015: 11:26 AM CST

Along with Crude Oil, Emerging Markets have broken a downtrend with a breakout and early reversal signal.

We’ll start with the Daily Chart for additional information and level planning:

After suffering a lengthy downtrend from April to August, shares may be reversing into a bullish breakout.

Shares of the EEM (Emerging Markets iShares ETF) fell from the $44.00 level to the spike reversal at $30.

During persistent downtrends, we like to trade retracement or “flag” style trades as the trend continues.

For detailed information and insider tips on how we recognize and trade retracements, check out our “Perfect Pullback” Strategy Lesson Bundle.

Now let’s talk about the current reversal.

A spike-low occurred late August and a retest of the support level – excluding the spike – occurred at $32.

From there, a positive divergence and visual bullish volume (money flow) accompanied a multi-day rally (and short-squeeze) toward – and now above – the falling 50 day EMA target near $34.50.

It’s important to note that during a trending phase, price tends to retrace toward the falling 20 day EMA and if it breaks above this level, it targets the falling 50 day EMA as has been the case during 2015.

However, a breakout – especially on higher volume – above the falling 50 day EMA is evidence of a possible Trend Reversal.

Note the green “Open Air” pathway above $34.50 and $35.00 per share if price does remain above this level.

Otherwise, a “Bull Trap” and bearish pathway develops on a return back under $34.50.

Let’s pull back the perspective to our Weekly Chart for more information:

EEM developed a wide Trading Range through most of 2013 through 2015.

However, a breakdown – and Trend Reversal – triggered under $39.00 per share which took the price toward our current levels near $30.00.

The snap-back reversal at this point is only a strong retracement on the Weekly Frame as price has powerfully “snapped-back” toward the underside of the falling 20 week EMA at $36.00 per share.

For now, our focal point will be the Daily Chart 50 EMA ($34.50) and the falling 20 week EMA ($36.02).

Watch these levels closely along with the “Open Air” pathways from which trades develop.

Follow along with members of the Afraid to Trade Premium Membership for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

2 Comments

2 Responses to “Strength and Breakout for Emerging Markets EEM”

  1. Crude Oil and Emerging Markets Break Downtrend Says:

    […] By Corey Rosenbloom […]

  2. Dane Says:

    We need to be very careful with these reversal things, as it can be seriously risky if we get it wrong. I trade with OctaFX broker, and they help me so much with their rebate program where I am able to earn 15 dollars profits per lot size trade, it really helps me with performance and allows me to be aggressive, so that’s why I am able to trade with ease, it really makes me work easily without facing any difficulty at all.