An inside week occurs when the current weekly price range for a security, market, sector, or an index falls within the price range of the previous week. Practitioners of Japanese candlestick charting will recognize this pattern as that of the Harami pattern. This important technical pattern can alert traders and investors to an impending directional trend change in the security in question.
The inside week typically occurs when there is widespread indecision or confusion in the marketplace. It often implies a market environment where the bulls and the bears are deadlocked as both parties are not strong enough to send the price beyond the range of the prior week. When an inside week develops toward the end of a prolonged downtrend and the security trades near significant technical support, it can signal an impending bullish trend change. Conversely, an inside day that develops near the end of a prolonged uptrend it can also signal the bull rally is maturing and warns of either a deeper correction or the start of a bear decline.
There are no hard and fast rules as to whether a trend reversal will occur. However, the traditional rule is that a convincing move above the top of the prior week’s high convinces buyers to return resulting in the next sustainable bull rally. On the other hand, when the security in question falls decisively below the prior week’s low this can trigger the next downturn. Whether you are a trader or investor, identifying the breakout/breakdown levels of the inside pattern can give you the confidence to implement the next strategy.
Enclosed are the weekly charts of major U.S. indexes including S&P 500 Index (SPX), Dow Jones Industrial Average (INDU), NYSE Composite Index (NYA), NASDAQ Composite Index (COMPQ), and NASDAQ 100 Index (NDX). Summarized below are the key technical levels to monitor heading into an important weekly close.
S&P 500 Index (SPX – 3,003.37)
2/24/20 weekly: High = 3,259.81, Low = 2,855.84, and Close = 2,954.22
Breakout above 3,259.81 and Breakdown below 2,855.84
Dow Jones Industrial Average (INDU – 25,917.41)
2/24/20 weekly: High = 28,402.93, Low = 24,681.01, and Close = 25,409.36
Breakout above 28,402.93 and Breakdown below 24,681.01
NYSE Composite Index (NYA – 12,542.74)
2/24/20 weekly: High = 13,654.00, Low = 12,024.45, and Close = 12,380.97
Breakout above 13,654.00 and Breakdown below 12,024.45
NASDAQ Composite Index (COMPQ – 8,684.09)
2/24/20 weekly: High = 9,322.88, Low = 8,264.16, and Close = 8,567.37
Breakout above 9,322.88 and Breakdown below 8,264.16
NASDAQ 100 Index (NDX – 8,594.49)
2/24/20 weekly: High = 9,194.91, Low = 8,133.85, and Close = 8,461.83
Breakout above 9,194.91 and Breakdown below 8,133.85