EEM Chart – Stuck in Trading Channel

I charted EEM near the end of the trading day on February 25, 2010 when it was trading at $38.59.  I have a vested interest in this because I’m short two March 41 naked puts.  From what I see on the chart I have a fighting chance to see my position end profitably since I took in $1.60 for each option. 

The way the chart is moving it looks like the trading channel holding recently gives EEM a range from $38 (ish) to 40.  Along with this trading channel, the three potential technical indicators that are going to be most interesting to watch are the 20 and 200 day moving averages and the trend line of lower highs from the beginning of the year.  EEM hit resistance at the 20 day moving average today and stopped its intraday rally from its lows.  If EEM can get above its 20 day moving average, which might be a tall order after dipping below it the past couple of days, it will have to fight to get above this trend line of lower highs.

On the other hand the 200 day moving average offered support today around the same area as the bottom of this trading channel I’ve identified.  I hold the 200 day moving average in high regard when I see support hold.  Once the 200 day moving average is in play the downside risk typically starts diminishing.  All of that together makes EEM a good chart to watch as one of these indicators is going to break soon and should show us the likely direction for the following few weeks or 10%, whichever comes first.  I’m expecting the move to be higher and probably won’t exit my position even on a dip below the $38 range.