Thursday, November 7, 2013

Russell 2000

The Russell 2000 inverse head and shoulders that we looked at on the first trading day of the year (January 2nd) and then again on May 15th has now played itself out on the weekly chart. 

The numbers I used from January were: Head 640, Neckline 868, and the target came out to about 1,100. As you can see on the chart, we are now in the target area. The big question is where do we go from here?

Several intermediate term indicators are showing higher risk on the long side now. I thought we might see 1800 on SPX by Thanksgiving, but a big reversal like we had today doesn't look too good for the bullish case. I still think it's possible though... because so far, the SPX is right at the 20day SMA, and the RUT is at the bottom of it's daily chart BB. 

Tomorrow might be a pivotal day.... stay on your toes and trade safe.    

Thursday afternoon


Thursday morning

USO: The trade is on
If you liked the chart/trading plan I posted Wednesday morning then you should take that initial 1/4 position today (if you did not buy into the close yesterday.)  I recommend a stop at 33.32.  (This is just under the low that printed Tuesday and y'all know I never pick round numbers for entry or exit.)  Below is the trade I posted yesterday.


The Trade
I may not get in but this is what I would plan:  Take a 1/4 position on the next open candle. I would like to buy into the close on that day.  My stop would be about 20 cents below the entry.  I would look to add another 1/2 position on the first open green candle and fill the last 1/4 on a bounce from an intra-day dip.

The target is a test of the neckline and I would sell into that level.  While the 200 day sma has not been particularly relevant the price did fall below and immediately trade back above it so don't be surprised if it makes a mirror image of that action on the way up.  If the position is not already full then the bounce would be a good spot to buy the last piece.  

Edit: Remember to pay attention to volume. If it is dropping while price is rising you could get left holding the bag if you buy then.  If volume is average or above then rising price is your friend.