5 day EMA and 20 day SMA crossover system is very effective when it combines with an MACD crossover.
MACD cannot be used alone. So combining it with the 5 day EMA and 20 day SMA is a nice way to avoid whipsaws.
If you see in the above chart There are two moving average crossovers displayed here. Both have given good profits. But in between those two crossovers there are two MACD crossovers. But the moving average crossover did not take place. So in this way we can avoid a whipsaw situation and enjoy big profits.
Coming back to russell 2000 index this one should close above 64 its key support area. Any close below it will take it around 61.
The index has MACD positive divergence. But the price is not able to trade above the 5 day EMA for more than 2 days consistently.
Still bears are in control but as long as 64 is not broken bulls have a chance in the near term.
Dow is trading well below it's 20 day EMA in daily chart
We had a small up move because of the POSITIVE DIVERGENCE that i have marked in the chart.
As long as the index keeps to 10000 the positive divergence will show some more effect and upside targets are possible.
But below 10000 it's trouble for the bulls
I have also shown the ichi cloud and it says "when we are below the cloud we are in bear market". Since we broke below the cloud there is a chance for a retracement. But will it be effective enough to go above the cloud to enter a new bull market? only time will tell.
All the contents of niftychartsandpatterns are for educational purposes only and are not Investment Advice or recommendations offered to any person(s) with respect to the purchase or sale of the stocks / futures. Niftychartsandpatterns shall not be held responsible for the actions of individuals, parties, or corporations taken in response to the ideas, thoughts, concepts or information presented in this blog. Hence all the visitors are requested to apply their prudence and consult their financial or investment adviser before acting on any of the Ideas in this blog.
"All through time, people have basically acted and reacted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why the numerical formations and patterns recur on a constant basis." —Jesse Livermore