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Chart Of The Day: Russell 2000 Setting Up To Outperform This Week

By Investing.com (Pinchas Cohen/Investing.com)Stock MarketsNov 22, 2021 15:35
ng.investing.com/analysis/chart-of-the-day-russell-2000-setting-up-to-outperform-this-week-97581
Chart Of The Day: Russell 2000 Setting Up To Outperform This Week
By Investing.com (Pinchas Cohen/Investing.com)   |  Nov 22, 2021 15:35
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Contracts on the Russell 2000 Index are leading a rally among US futures ahead of Monday's Wall Street session, at the start the holiday-shortened Thanksgiving week. If history is a guide, considering seasonality statistics, the broader US market will rally, as it has done most often during this period based on data since 1950.

Some market observers expect that small caps will have the edge. That's due to their lower valuations after being pressured by the pandemic, making them more desirable as the economic recovery gains traction. As well, small cap domestic firms have the ability to respond better to rising costs than large cap companies. Technical signals concur.

RUT Weekly
RUT Weekly

While the small-cap index has been falling for the past two weeks, the chart reveals the selloff could be nothing more than a return move. The benchmark's proximity to the top of either an asymmetrical or ascending triangle—both are bullish in an uptrend with an upside breakout—provides the technical reason for the Russell to climb this week. Also, note that the decline came after the price reached the top of the rising channel, which is supported by the 50 WMA.

The short moving average crossed above the long moving average on the MACD (Moving Average Convergence Divergence), demonstrating improving pricing, sending out a buy signal. The Rate of Change (ROC) is on the rise, showing that momentum also supports an advance.

Trading Strategies

Conservative traders should wait for the price to bounce off the top of the pattern and make a new high before considering putting money at risk.

Moderate traders would be content with support proven by the pattern.

Aggressive traders may go long at will, provided they accept the higher risk proportionate to the higher reward of moving before other traders. A coherent trade plan is necessary for success. Here is an example:

Trade Sample

  • Entry: 2,345
  • Stop-Loss: 2,340
  • Risk: 5 points
  • Target: 2,445
  • Reward: 100 points
  • Risk:Reward Ratio: 1:20

Author's Note: This is just a sample, not the singular truth on how to approach this trade. You need to develop your own trading plan which incorporates your timing, budget and temperament. Until you learn how to do that, use our samples for learning purposes but not profit. Otherwise you'll end up with neither. Guaranteed. And there's no money back.

Chart Of The Day: Russell 2000 Setting Up To Outperform This Week
 

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Chart Of The Day: Russell 2000 Setting Up To Outperform This Week

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