Russell2000 moved firmly higher in Q1 2023, forming a flag inside a long-term consolidation triangle, and has tested 2000 recently for a higher breakout. A break above 2000 is required for a continuation higher to 2150.
On the weekly RUSSELL200 chart, a breakout higher above the long-term consolidation triangle 2000 resistance did not happen and we had a pullback lower. The retreat can take us to the 1815 downside resistance zone and a break below would invalidate the upside continuation higher. We are giving a high probability for a short trade entry here and a test of 1815 a key downside resistance in this swing range which seems to be continued.
As the famous trader says…
“In this business, if you’re good, you’re right six times out of ten. You’re never going to be right nine times out of ten.”Peter Lynch
How to trade this?
It is obvious that for Q1 2023, we have this upside resistance which should be broken for an upside continuation. This means that now short trade entries have some small advantage over the long trade entries as the overall trend is still down and it will be available for the long trade entries upon a break above 2000 which needs to be confirmed. You should open a short trade, not so big in size with a close stop loss order just above 2000 to target 1800. The risk to reward on this trade is almost 2.15 and the timing of the trade could be Monday NY session or Tuesday European session.