Going sideways for more than 5 years the emerging markets gapped up this week breaking above the neckline of an inverse head and shoulders pattern. The move higher was not unexpected as the bullish positive divergence that formed on the RSI momentum back in early January gave us a heads up to expect a bounce. What is interesting is the strength and ongoing conviction of the move as it looks like maybe a reversal rather than just a counter-trend, oversold bounce. A confirmed breakout of this pattern has an upside target near last year’s highs some 20%+ higher with the potential for much more.

It is still a bit early on calling this a breakout (and opportunity) since the confirmation comes on a weekly close which won’t actually occur until this Friday. Because I usually post after-the-fact examples and would normally wait until confirmation has occurred, I wanted to give readers an early, real-time heads up on this opportunity. Whether this turns out to be a fake out and quickly reverses or peters out before hitting its target only time will tell but the setup is compelling. Anyone following along please make sure you have a position management plan in place before entering as that is specific to your risk tolerance, not mine.