Don't Ignore This Chart

Etrade Corrects into Fibonacci Cluster

Arthur Hill | 

It has been a rough year for small-caps because the Russell 2000 iShares is up just 1.34% year-to-date and severely trailing the S&P 500 SPDR, which is up around 5.5%. Chartists looking for clues of a small-cap revival may want to watch E-Trade Financial (ETFC) and the other discount brokers (SCHW and AMTD). I will focus on ETFC today because it is currently correcting within an uptrend. An end to this correction could signal a return to animal spirits and a small-cap revival. First and foremost, the long-term trend is up because the stock hit a 52-week high in January and the 50-day EMA is above the 200-day EMA. 

Assuming a long-term uptrend, this means the decline over the last three months is a correction within that uptrend and we should be on guard for signs of a reversal. First, there the Fibonacci cluster in the 32 area marks a potential reversal zone to watch. The first Fibonacci level is a 38% retracement of the November-January advance and the second is a 61.8% retracement of the June-January advance. Together, these two levels mark a possible reversal zone. As far as an actually reversal, I am watching the falling wedge and resistance around 35. A breakout here would suggest that the correction is ending and the bigger uptrend is resuming. 

Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan

Arthur Hill
About the author: , CMT, is a Senior Technical Analyst at He has written articles for numerous financial publications including Barrons and Stocks & Commodities magazine. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed technician. In addition to his CMT designation, Arthur holds an MBA from the Cass Business School at City University in London.
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