The VIX Prints Reversal Candlestick Amid Key Discussions On Debt Ceiling: A Technical Analysis

The CBOE Volatility Index (VIX), tracked by the ProShares Ultra VIX Short Term Futures ETF UVXY, closed near flat on Tuesday ahead of a key congressional vote on the tentative deal reached by President Joe Biden and House Speaker Kevin McCarthy to increase the debt ceiling, which set for a House Vote on Wednesday.

The price action on the VIX caused the index to print a doji candlestick on the daily chart. A doji is a transitional candlestick that suggests a change in direction could be on the horizon.

When found in a swing to the downside, a doji candlestick can indicate a security’s price will change direction the following day and move higher. In contrast, when a doji candlestick prints when a security has been trading higher, it can indicate the local top has occurred and a retracement is in the cards.

It should be noted that candlesticks are lagging patterns, meaning that the next candlestick has to print before the previous candlestick can be confirmed as being a true predictor of the subsequent price action.

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The VIS Chart: If the VIX’s doji candlestick is confirmed on Wednesday with higher prices, it’s likely to coincide with a retracement in the stock market. If that happens, the VIX will confirm its uptrend remains intact because Tuesday’s low-of-day will serve as the next higher low within the pattern

• If the VIX trades higher on Wednesday, traders want to see the index regain support at the 50-day simple moving average, which could accelerate momentum. Traders wishing to trade the volatility in the stock market can use MIAX’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index (SPIKE), track expected volatility in the SPDR S&P 500 over the next 30 days.
• Traders who are bullish on the general market want to see the VIX negate the doji candlestick by falling lower on Wednesday. If the index declines under the 16 mark, the uptrend will be negated.
• The VIX has resistance above at 17.71 and 19.43 and support below at 15.68 and 14.10.

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