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IWM Swing Trade Idea

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IWM Swing Trade Idea

IWM (Russell 2000 Small Cap Index ETF) offers an objective long entry on what appears to be a momentum fueled overshoot of key support on the daily chart while deeply oversold with potential bullish divergences forming on the PPO & RSI. As such, IWM will be added as an official long swing trade around current levels. The price targets are T1 at 138.96 and T2 at 143.88. The maximum suggested stop (if targeting T2) is any move below 129.25 (typo corrected) with a suggested beta-adjusted position size for this trade of 1.0.

IWM daily Dec 20th

IWM daily Dec 20th

As with the QQQ active long swing trade, this should be considered an aggressive, "catch-a-falling-knife" trade & as such, one should pass if that does not mesh with their own unique risk tolerance, trading style, objectives & outlook for the stock market. As with the QQQ swing trade, a more conservative option for those looking to start adding some long exposure in anticipation of the next rally would be to take a starter position of a fraction lot here while scaling into a position of IWM over the next 3-7 trading sessions.

If my take on the market is correct, the market is either at or very close to a tradable bottom or we are on the verge of a final capitulation waterfall-type selloff that would likely cause a sharp but relatively swift flush out move down below the key supports that the major indices are trading at, followed by a sharp reversal & rally. While anything, including an outright market crash is always a possibility, if my primary scenario (we are at or very near a bottom) or alternative scenario (another ~3% washout move down) it appears that the R/R at this time favors going long vs. short.

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2018-12-20T15:47:52+00:00Dec 20, 2018 2:49pm|Categories: Completed Trades - Long|Tags: |6 Comments

6 Comments

  1. mcase01 December 20, 2018 2:53 pm at 2:53 pm

    Took this trade earlier during flush selling puts deep OTM and buying URTY in accounts without options. Really like the risk reward here

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    • rsotc December 20, 2018 3:47 pm at 3:47 pm

      Odds of being stopped out on a washout move are decent but the R/R more than makes up for that IMO. If they run the stop, I’ll be on watch for the next objective entry. Best of luck on that trade!

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  2. ajay December 20, 2018 3:29 pm at 3:29 pm

    Stop should be 129.25 in the text.

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    • rsotc December 20, 2018 3:49 pm at 3:49 pm

      Nice spot, I just fixed that typo. I’ve been running a 100 miles a minute today & made several typos in my haste to get today’s posts out asap with the fast-moving market. Thanks for pointing that out.

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  3. kumarg December 20, 2018 3:30 pm at 3:30 pm

    I have entered long TNA. What’s the target price levels for TNA?

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    • rsotc December 20, 2018 3:55 pm at 3:55 pm

      It’s impossible to accurately correlate the price targets on IWM to TNA due to the decay suffered from the 3x leverage on TNA. What I mean is that the horizontal support levels on my daily charts of both do not align because of the price decay on TNA. Best to just keep an eye on IWM or set a price alert at the IWM target(s) that you want to sell at, if the trade pans out & then close out the TNA trade.

      Most brokers will allow you to set a conditional order to sell XYZ when ABC hits a price of $XX.XX so you should have that option as well. If you call your broker, they should be willing to walk you through that order entry process. Best of luck on the trade!

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