Bearish Eveningstar Reversal Formation on the Russell 2000 Chart

By | December 13, 2016

Over the last several sessions there has been a slight divergence between the Russell 2000 and the broader market indices, and in that short time a bearish eveningstar pattern has formed on the daily iShares Russell 2000 ETF (IWM) chart.
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The pattern consists of a large “up” day candle, followed by a narrow opening and closing range “doji” candle, and completed by a large “down” day candle, and represents a bullish-to-bearish transition in trader sentiment. The index is overbought as indicated by the RSI reading and Chaikin money flow has crossed below its 21 period signal average. But like all technical patterns the eveningstar requires confirmation and in this case, a break below the steep uptrend line would be an initial step. Even if the trend line is penetrated any pullback will probably be short lived, as it would provide an entry point for those who have missed this sharp rally.

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