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<\/p>\nThe iShares Consumer Discretionary ETF (IYC) has been under pressure since November 2021. IYC is currently down over 26% from its 2021 highs.<\/p>\n
Of course, the consumer discretionary sector isn’t alone when it comes to rough performance over the last 18 months.<\/p>\n
But unlike some other sectors that have outperformed, like semiconductors, consumer discretionary stocks still look like they’re in for more pain.<\/p>\n
Let me walk you through a daily timeframe chart of IYC so I can show you the bearish setup that’s currently in the works.<\/p>\n
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There are two key features to this price chart.<\/p>\n
IYC is currently trading within the boundary lines of a larger triangle pattern (the blue lines on the chart). Triangles are trend continuation setups.<\/p>\n
As we can see on the chart, IYC has been in a downtrend since late 2021. This means that after this triangle breaks out, IYC will likely resume its downward slide.<\/p>\n<\/li>\n
We have a cluster of important moving averages (MA) all trading tightly together. The MAs on the chart include the 20, 50, and 200-day.<\/p>\n
Whenever you have a cluster of MAs all trading sideways, it’s time to pay attention. This is usually when traders ignore a market because they think sideways action is boring.<\/p>\n
But that’s a mistake because it just means the market is building pressure and getting ready for its next big move.<\/p>\n
If IYC were to break below all three MAs, it would support the larger triangle pattern and increase the odds of a breakdown.<\/p>\n<\/li>\n<\/ol>\n
There are a couple of ways to trade this pattern if the market starts breaking lower.<\/p>\n
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Free Trading Resources<\/strong><\/p>\n Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n <\/p>\n An aggressive trader could look to establish a position if the support offered by the three MAs were to fail. This would eventually lead to the MAs sloping downwards instead of going sideways.<\/p>\n On the other hand, a more conservative approach would mean waiting for the market to break out below the support line of the triangle pattern.<\/p>\n Neither approach is necessarily better or worse than the other. It ultimately comes down to your individual risk tolerance and trading style.<\/p>\n More aggressive traders do tend to stack up larger gains, but they’ll also often take on more losses as well.<\/p>\n Conservative traders will likely see smaller average gains but will enjoy a higher win rate.<\/p>\n That’s why when it comes to trading, it’s important to truly know yourself and know what will work for you.<\/p>\n Happy trading,<\/p>\n Imre Gams<\/p>\n <\/p>\n