IWM has managed to break above the downtrend line that defines the top of the most recent descending broadening wedge pattern, although by less than 1%. So far, IWM reversed off the area of it’s previous reaction (and all-time) high, which is resistance until taken out. My preference for a stop on the IWM short will be largely predicated on what the broad market does (using the SPY as a proxy) over the next few trading sessions as I believe that we might be at a key inflection point right now. I discuss that in detail in the “Trend” video that I just completed (uploading to YouTube now), essentially pointing out that the market remains, albeit barely, in a short-term downtrend while any significant additional upside will trigger a trend reversal. In addition, we are within mere percentage points of triggering a fairly reliable sell signal on the intermediate-term time frame, should the markets drop by just a few percentage points from current levels. In summary, how we close this week (up or down) could very likely determine the trend going forward for the next few weeks or more.
For those preferring a more traditional, objective stop based solely off the IWM chart , a stop about 1-2% above the previous reaction (and all-time) high of 100.38 would make sense both from a technical perspective (a 1-2% buffer above the previous highs helps minimized getting stopped out on a fake-out, stop-clearing run). As this trade is only down about 2.2% from entry (97.94), that would also give the trade roughly a 3:1 R/R based on the profit target of 88.90. Updated 4 hour chart above.