The iShares Emerging Markets ETF (EEM) has been in a downtrend all year. Two weeks ago it closed just below the 50% Fibonacci retracement level of its 2016 low and 2018 high. It looked like the fund price might accelerate even lower.
But in a sudden reversal last week, the EEM was up about 5.5% and a bullish hammer candle formed on the weekly chart. The question now is will there be follow-through price action this week, that retests the long term downtrend line?
Moving in on a more the more detailed daily time frame shows that the EEM fund is currently testing another important level of formidable resistance. The 50 day moving average has rebuffed numerous attempts by the fund to break higher, as the average has trended lower.
On a few occasions during the decline the EEM has held above the average for several days, but then dropped back below it. In every case it made a new lower low.
This time the EEM may pierce through the 50 day moving average which is currently in the $41.34 level. But the weekly downtrend line, which has never been broken, is just over head, situated at $41.85. It is going to be difficult for the EEM to close above this level.
Trends do change. The weekly candle is bullish and the 50% retracement level is a good psychological platform for a reversal move. But transitioning from this long term down trend will require several days or more of trading above the weekly downtrend line.