EEM unable to break through key resistance level
iShares MSCI Emerging Markets ETF (EEM) Technical Analysis Report for Sep 16, 2020 | by Techniquant Editorial Team
EEM finished Wednesday at 45.05 edging lower $0.06 (-0.13%). Trading $0.15 higher after the open, the market was unable to hold its gains as the bears took control ending the day below its opening price. The last time this happened on July 7th, EEM actually gained 2.59% on the following trading day. Closing within the previous day's range, prices failed to decisively move beyond the prior day's trading range in a lackluster session.
Daily Candlestick Chart (EEM as at Sep 16, 2020):
Wednesday's trading range has been $0.37 (0.82%), that's below the last trading month's daily average range of $0.52. Things look different on the weekly timeframe, where the market's trading range of the last week has been above the market's average weekly trading range. The longer-term, monthly volatility is currently slightly lower than usual for EEM.
Even with a strong opening EEM ETF closed below the previous day's open and close, forming a bearish Engulfing Candle. Additionally, one bearish candlestick pattern matches today's price action, the Black Candle.
Unable to break through the key technical resistance level at 45.37 (R1), the ETF closed below it after spiking up to 45.40 earlier during the day. The failure to close above the resistance could increase that levels significance going forward. After having been unable to move lower than 45.02 in the prior session, EEM found buyers again around the same price level today at 45.03.
While the market is currently in a short-term downtrend, this might just be a correction, as both the medium and long-term trends are still bullish.
With prices trading close to this year's high at 46.32, upside momentum could speed up should EEM ETF be able to break out to new highs for the year. Further buying might move prices higher should the market test August's nearby high at 45.56.
Among the seven market conditions that our pattern recognition engine identified today, the statistics for the OHLC Patterns based market condition "Bearish Engulfing Candle" stand out. Though it is usually interpreted as bearish, it has actually shown to be bullish for EEM ETF. Out of 65 times, EEM closed higher 60.00% of the time on the next trading day after the market condition occurred. The optimal exit for swing trading this condition on the long side has been after six trading days, showing a win rate of 56.92% with an average market move of 0.20%.