IWM (Russell 2000 Small Cap Index ETF) appears to offer an objective entry here (current price 127.18) with a suggested stop on a daily close above 130.90 (edit: the original stop was incorrectly listed as well below the entry price and has been corrected), about 3% above current levels. This short entry is based off numerous factors which I will follow up with in another post later today. I just wanted to get this trade out before well in advance of the close today as while I typically avoid entering new positions just before a weekend, I believe that the R/R favors shorting IWM before the close today vs waiting until next week & risking a less favorable entry on a gap down.
Keep in mind that this should be considered an aggressive, counter-trend trade, at least with the very near-term trend very bullish while some of the intermediate-term trends on IWM remain bearish for now, albeit by a small margin. Price targets will be included with the follow-up post & at this time, I’m consider IWM as both a potential quick oversold/pullback trade as well as a potential long-term swing trade, should the recent price action prove to be a blow-off top with some decent technical evidence of a reversal next week.
The suggested-beta adjustment for a quick pullback trade that might only last a few days could be as high as 2.0 (i.e.- twice a typical position size) as that would effectively provide for a loss allowance of just over 6% (2 times the 3% stop-loss listed above). As such, one could use TWM (2x short $RUT), or a smaller position of TZA (3x short) although my preference would be TWM, especially for those that might book partial profits on a pullback and/or let the rest of the position ride as a longer-term swing trade (as the decay in TWM isn’t very bad compared with some other leveraged ETFs).