Don't Ignore This Chart!

Small Caps Print Bearish Shooting Star Doji

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On Monday, the Russell 2000 ($RUT) was breaking out to an all-time high intraday.  Unfortunately, it wasn't confirmed on the close as this benchmark of small cap stocks reversed late in the day.  It not only left a bearish tail to the upside and closed at its open and near its low of the day (aka shooting star doji), but this failure was notable because it was at all-time closing high resistance.  It doesn't help that it occurred on April 13th, just before income tax liabilities are due.  The balance of today will be interesting for sure, but based on yesterday's technical developments, the odds appear to be stacked against small caps in the very near-term.  There's also a long-term negative divergence in play, further muddying the waters for the longs.  A battle could take place just beneath the 1250 level where gap, price and trendline support all converge.  A close above 1267 would negate this bearish development.  Check out the chart:

 

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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