Simplistic technical analysis for Russell 2000 (October 26th 2014)

In my previous week's post, I had suggested that the Russell 2000 Index will rise to 1160 and then fall. This past week the index did rise as suggested, but not all the way to 1160 as yet. The index reached 1120 and I think it will continue that trend till 1145-1150 by the end of the week.

In terms of technical analysis, I will use the similar set of indicators as previous week, with minor changes.

We are looking at the one year candlestick chart for Russell 2000 on Yahoo stocks. I have added the following indicators to the chart.

1. Bollinger Bands at 20 days and 2 Standard deviation
2. 20, 50 and 200 day Simple Moving Averages
3. MACD indicator for 26, 12 and 9

If we look at past week's action, the overall downward trend continued from July 2014 (shown by red arrows 1 and 2).

The daily candlestick formation indicates a pause before the stock will continue the upward trend in the near term (next 3 to 4 days). This is highlighted in the red boxes (5, 4 and 3) to compare with historical trends.

The short term reversal will start perhaps middle to end of next week, as the index touches the top of the bollinger band as well as MACD divergence histogram touches 7.3. The MACD and signal however are much below zero indicating that the price will continue higher in the short term though at perhaps a slower rate.

My amateurish predictions:

1. The index price will now rise at a slower rate (with temporary pullbacks on some days of the week)  to 1150 -1160 towards the end of the week.

2. The reversal will not start before the end of the week, by end of 2 weeks we may see the price testing new lows at 1030 or lower.