Is The Small-Cap Selling Over? Here's What The Chart Says

The selling in the small-cap sector of the stock market may be about to pause or at least halt. After a nasty move lower the iShares Russell 2000 ETF IWM has reached a level that has been resistance in the past. Sometimes, levels that had been resistance can convert into support.

That may happen here.

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As you can see on the following chart, the $171 level was resistance for IWM. Many investors sold when the shares reached it, and IWM backed off and went lower.

But now the price is higher.

A number of the investors who sold at $171 now regret doing so. Many decide to buy their shares back, but only if they can get them for the same price they were sold at.

As a result, they place their buy orders around $171. If there are enough of these orders, the former resistance level will convert into support.

That could put a floor under the price. It may even cause the market to reverse.

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