Trading Game Plan

Russell 2000 – Trading Game Plan (Update) (2016/11/02)

Previous Update: https://wingcapital.wordpress.com/2016/11/01/russell-2000-trading-game-plan-update-20161101/

Markets were jolted on first day of November on heightened political uncertainty with US election looms next week. Russell 2000 plunged below Oct 27 with another wide ranging bar and below the bollinger band once more. While we admit we were wrong footed as we were looking for a larger bounce to 120 area, we are still in the camp a bounce is due and the following chart illustrates why.

20161102-IWM.png

The MACD dropped to a new swing low and is now at the same level as in Aug and Dec 2015 just before a sharp bounce ensued. We are expecting a similar bounce which would only be temporary before the next flushout leg down to 200DMA.

In short, we are still ST bullish and LT bearish. We went flat as precaution and are looking for a re-entry point. With S&P 500 just crumbling under key support, further downside pressure is warranted across the board and we would hence look to buy at more favorable price point.

20161102-RUT4hr.png

Looking at the intraday chart, the Russell 2000 futures tumbled below a descending channel on the latest leg down, and chances are we could be spiking down to 1150 that is where we would look for a buy entry. Concurrently we would also look for capitulation signals in broader markets, such as a spike up reading in TRIN and put call ratio. Alternatively, on a confirmed close back above the channel and 1180 would also trigger a buy signal. All in all, we are staying nimble as the risk is still to the downside but our broader view on the market remains unchanged even though we are adjusting the plan tactically.

Buy Points:

  • 1150 horizontal support
  • Confirmed 4-hr close above 1180

Sell Points: 

  • 1195 horizontal resistance
  • 1207 broken channel line

 

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