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Stock Market IWM Sets Up Dual Pennant/Flag Formation – Suggesting Very Volatile Apex Even

Stock-Markets / Stock Market 2021 Aug 28, 2021 - 11:26 PM GMT

By: Chris_Vermeulen

Stock-Markets

Recently, we’ve seen an extended sideways price trend in the Russell 2000 sector that started in February/March of 2021.  The peak price level on the IWM, the Ishares Russell 2000 ETF, reached $234.29 and has consolidated in a sideways price range for more than five months now.  In mid-July, IWM broke lower and established a fresh new price low of $209.05 – setting up a second Pennant/Flagging price formation (in YELLOW).  We believe this extended sideways Pennant/Flagging price channel is setting up a major volatility event (breakout or breakdown) as the price continues to near the Apex.

Dual Pennant/Flag Setups Suggest Big Volatility On The Horizon For Traders

We’ve drawn the longer-term Pennant/Flagging channel in CYAN and the more recent Pennant/Flagging channel in YELLOW.  What we find interesting is that price is certainly attempting to break free of this channel recently but has continued to be constrained by a lack of directional momentum.


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The extended price consolidation shown on this Daily IWM chart highlights the lack of upward price momentum in the Russell 2000 compared to the continued bullish trending of the NASDAQ, S&P500, and DOW JONES.  Historically, the Russell 2000 tends to react to market strength and weakness a bit earlier than the other major indexes.  The current sideways price channeling suggests the reflation trade momentum may have already stalled out, while the NASDAQ and other major indexes continue to trend higher in a very late stage rally.

As price continues to channel toward the dual-Apex level, we believe a major volatility event will take place in late August 2021 or early September 2021 – possibly very similar to what happened in 2018 when the US Fed prompted a major downtrend in the US markets after raising rates in September 2018.  This prompted a broad market decline totaling more than -20% in most major US indexes.

Weekly IWM Chart Highlights Pending Flag Apex (Near Early September)

This Weekly IWM chart highlights the continued consolidation and recent increase in price volatility related to the extended Pennant/Flag formation setting up.  Notice how volume has continued to weaken while the recently extended price range has broadened to create the new YELLOW Pennant/Flag price channel.  We believe this is increased price volatility starting to build as price attempts to break free of the Apex channels.  Ultimately, some bigger volatility events will unfold causing the price to either break upward or downward from the $220 Apex level.

If IWM holds above $207, there is a moderately strong potential for a new bullish price trend to set up prompting another wave of upward price trending.  If that $207 level is breached to the downside, then we will have broken a recent “new price low” and that action will confirm a new price downtrend.

There are a number of factors at play in the markets right now, Precious Metals, Energy, Consumer activities, extended price peaks/trends, and various global market events.  Traders need tools and resources that help them navigate these crazy trends and help them find the best opportunities for trades.  This is where we can help you to focus on the hidden gems of various market sectors.

Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

For those of you who are interested in Options Trading, our resident specialist Neil Szczepanski will be hosting a LIVE two-part Intermediate Course beginning on Wednesday, August 25, 2021. Neil will dive deep into the different strategies and outline what are the best trade setups and what to avoid – helping you to become a more knowledgable, confident, and advanced options trader. To learn more, or to register for the course, kindly click on the following link: INTERMEDIATE OPTIONS MENTORING COURSE.

Have a great day!

Chris Vermeulen
www.TheTechnicalTraders.com

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several leading financial hubs like MarketOracle.co.uk

Disclaimer: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. Technical Traders Ltd., its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. Technical Traders Ltd. and the author of this report has been paid by Cardiff Energy Corp. In addition, the author owns shares of Cardiff Energy Corp. and would also benefit from volume and price appreciation of its stock. The information provided here within should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. Technical Traders Ltd. and the author of this report do not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect.

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