Russell, 22 Dec. End of a Gigantic Range
IWM has been in a range for 329 days. It has tested the lower boundary 7 times. Many analysts now believe that 2022 will see a rotation back into value and small-caps, after 2021 was the year of the big tech corporations.
Elliott:
The range makes it difficult to determine a clean count, however we can count 5 waves to the downside in the last swing from 8 Nov. This is important because any complex correction such as the WXYXZ would complete with a 5-wave move, before price departs to the upside.
Oscillators:
The MACD crossover is imminent and the MFI is pointing upwards after a bullish divergence.
Geometry:
Price has reversed on the 50% Fib of the current pitchfork with a typical reversal doji. The next resistance is the pitchfork median at 221, potentially the end of wave (i).
How I trade it:
If we assume that the range is a completed re-accumulation, we can begin to build back long exposure. In Wyckoff terms, we would now be looking for the LPS/SOS stages. If price gives us a wave (i)-(ii) structure (in blue), we will get a H&S pattern that provides a solid bullish setup (long above wave B of (ii)). Support on the pitchfork median and a break of the 20 week MA at 224 would then signal that our assumption is likely correct.
A well-prepared entry is important because price can also exit the range to the downside. The bullish idea is invalidated if price moves out of the pitchfork altogether, which is below 202.
Elliott:
The range makes it difficult to determine a clean count, however we can count 5 waves to the downside in the last swing from 8 Nov. This is important because any complex correction such as the WXYXZ would complete with a 5-wave move, before price departs to the upside.
Oscillators:
The MACD crossover is imminent and the MFI is pointing upwards after a bullish divergence.
Geometry:
Price has reversed on the 50% Fib of the current pitchfork with a typical reversal doji. The next resistance is the pitchfork median at 221, potentially the end of wave (i).
How I trade it:
If we assume that the range is a completed re-accumulation, we can begin to build back long exposure. In Wyckoff terms, we would now be looking for the LPS/SOS stages. If price gives us a wave (i)-(ii) structure (in blue), we will get a H&S pattern that provides a solid bullish setup (long above wave B of (ii)). Support on the pitchfork median and a break of the 20 week MA at 224 would then signal that our assumption is likely correct.
A well-prepared entry is important because price can also exit the range to the downside. The bullish idea is invalidated if price moves out of the pitchfork altogether, which is below 202.
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