I believe that as of late, the Russell 2000 index and it's future contract, the mini Russell 2000 are the leaders in stock market behavior. With the recent sell off in equities, the big drop in China's index, and the 4% drop in the Nikkei this morning, I wanted to get more clues about what may lay ahead for our equities and I opened my daily Heiken-Ashi chart for mini Russell 2000.
What I see is a market that has tested key support areas right around the 1224 ( September contract) three times! I also measured the move down that we had between April 27th and May 6th, and the move down we currently have is almost the EXACT magnitude.
While I believe that medium to longer term we should see a more meaningful correction for the short term, (i.e. the next few days) I think we will see a bounce from this levels as long as we can hold, and not close below 1224.
A Number of Options
There are more than a few ways to play this, the first is to try and go long around 1230 and place a stop below the recent lows. Another is to wait for a close below this level and establish longer term short positions. In between the volatility, intraday provides MUCH range, opportunities and risk....
Many ways to trade any market, many ways to lose money in any market and only very few ways to lock in gains - this one is not different. If you need help creating a trading plan, visit our broker assist services.
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