Daily Watchlist · On Our Radar · Trading Game Plan

Russell 2000 – Trading Game Plan (2016/10/31)

In light of the technical pattern in Russell 2000 (IWM) as highlighted in our weekly commentary which presents great trading opportunities, we will follow the index more closely and dedicate a  trading game plan, and look to capitalize on a daily basis, both long and short, as the technical picture continues to unfold. Recall we are witnessing the resemblence of the 2015 July-Aug correction pattern being played out.

20161029-iwm

Although history never repeats, it tends to rhyme. So by no means we expect the script to play out exactly, hence the need of a dynamic trading plan that adapts and adjusts to new developments and position ourselves accordingly based on new information unveiled to us in the charts.

A summary of bearish technical developments of the IWM include:

  1. Broke through uptrend from Feb lows last week
  2. Plunged below up channel from July
  3. Broke up channel in MACD on daily chart
  4. Broke 20WMA on weekly chart
  5. Bearish MACD crossover on weekly char

That being said, on the daily chart, IWM closed just under the lower bollinger band on daily chart which signals oversold conditions. And as witnessed in the 2015 pattern, there will be occasion sharp bounces towards 20DMA when we get oversold. Any bounce likely would stall at 120.

We will also use the intraday chart in Russell 2000 futures to aid us in determining buy and sell points.

4 hour

20161031-RUT.png

1 hour

20161031-RUThrly.png

As of writing, Russell 2000 futures is testing steep downtrend drawn off the highs just before the plunge below the up channel. It is also confined in a larger down channel from the October highs, and post-FBI bombshell on Friday, it plunged to the bottom of the channel, held and then recovered.

With this week being the most favorable for bulls in terms of seasonality, we expect the steep downtrend to be broken and charge towards the broken down trend and up channel near 1200 to 1210 area, and that is where we will setup our sell points. We will also buy on a confirmed break above the steep downtrend.

Here are our buy / sell parameters:

Buy: 

  • 1177 (bottom of channel)
  • confirmed close above 1192 on 1-hr chart

Sell:

  • 1205 (backtest of broken up channel)
  • 1208 (backtest of LT up trend)
  • 1212 (top of ST down channel)

We will keep track of progress of this trading game plan on daily basis as well as update if there are any major technical developments

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