RUSSELL2000 is showing a continued upward trend long-term. The monthly chart shows that Russell2000 is testing a strong support of 1648. On the chart, you can see this month’s strong ongoing pullback from 1800 and a hold of that pullback should be strong at this swing bottom 1648 level if the uptrend should continue. A break below 1640 will tend to invalidate the upside extension in the measured fifth wave long-term.
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The Weekly Russell2000 chart reveals the ongoing broadening wedge and a confluence of the support at the 1640-1650 zone. A break below 1640 is required to invalidate the upside extension and deny the fifth wave continuation higher, and we are seeing a test of the broadening wedge line. It is advisable to position yourself in just one trade direction and not to try to catch every swing. We need to see a bounce off this zone to extend higher. If we get a bounce this will be a perfect long trade opportunity.
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“If you can’t take a small loss, sooner or later you will take the mother of all losses.”Ed Seykota
How to trade this?
It is a fact that a strong upside support for Q4 is 1600. If we get a confirmed bounce from here and a break above the 1700 we could see an extension higher to 1800 again. Near-term, long-trade entries have a higher probability of success. We can open the long trade here with a bit of risk and stop the loss below 1640. You can trade this price action with the options as well.
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