This Pattern Has Marked Highs In The Russell 2000 Since October 2018 — Another Just Formed

By | May 8, 2019

All the significant highs that were made on the Russell 2000 (RUT) chart, going back to October 2018 have been signaled by an eveningstar candle pattern.

Most readers know what a candlestick pattern is and what it suggests about trader sentiment. The eveningstar is a three day reversal pattern that starts with a large up-day candle, is followed by a narrow opening and closing range”doji” candle, and is completed by a large down-day candle. This sequence suggests a transition in trader sentiment from bullishness, to a neutral stance, to finally bearishness.

Note the eveningstar formations on the daily Russell 2000 chart. They have marked highs in October and November last year and high in February this year. Another eveningstar has formed this week just below horizontal resistance in the 1607 area.

If there is a repeat of the price action that has followed the formation of these patterns in the past, then the small caps are headed lower.

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