ETF EEM Emerging Markets Weekly Options Analysis
Bollinger Bands- the ETF EEM has consolidated to the point where it is looking for a way to break out. It ended the day Friday at the bottom of the Bollinger Bands. If the same formation continues, it looks as if it is ready to move up again. But we are watching to see if it is ready to break through and form the second flag pole.
RSI- the EEM is following the same flag pattern as the stock. It shows a bullish support but let us not forget we are in a bearish formation as we consolidate so we cannot read much from here. Be cautious here.
MACD- as with the RSI, mirrors the EEM stock chart. Both the MACD & MACD Histogram are showing higher highs and higher lows. This indicates a breakout eventually—soon in one direction or another. We are lightly bullish but we are getting ready to break out in a continued southward move
Chart- the Flags and Pennants can be categorized as continuation patterns. They usually represent only brief pauses in a dynamic stock. They are typically seen right after a big, quick move. The stock then usually takes off again in the same direction. Research has shown that these patterns are some of the most reliable continuation patterns
Bearish flags are comprised of higher tops and higher bottoms. "Bear" flags also have a tendency to slope against the trend. Their trend-lines run parallel as well. Flagpole: The flagpole is the distance from the first resistance or support break to the high or low of the flag/pennant. The sharp advance (or decline) that forms the flagpole should break a trend line or resistance/support level. A line extending up from this break to the high of the flag/pennant forms the flagpole.
Flag: A flag is a small rectangle pattern that slopes against the previous trend. If the previous move was up, then the flag would slope down. If the move was down, then the flag would slope up. Because flags are usually too short in duration to actually have reaction highs and lows, the price action just needs to be contained within two parallel trend lines.
Making a play on the EEM Emerging Markets ETF should be positioned for a bearish move.