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IWM Trade Entry & Setup

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).

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2016-11-11T16:07:30+00:00 Nov 11, 2016 2:52pm|Categories: Completed Trades - Short, Equity Market Analysis|Tags: |5 Comments

5 Comments

  1. retireat60 November 11, 2016 2:55 pm at 2:55 pm

    need to change that daily close number randy

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    • rsotc November 11, 2016 4:05 pm at 4:05 pm

      Yes! Thx for pointing out that typo. I had a bunch of numbers on my scratch pad & apparently wrote down the wrong value for the stop although I did intend to list around 3% above the entry price. The suggested stop should have been listed as a daily close over 130.90, which is approximately 3% above the entry price of 127.18 (with IWM moving higher to close at 127.39, so most would have had a more favorable entry since the entry was published).

      I will correct the typo asap.. Thx again for pointing it out. Typos are common as I rush to get some of the more time sensitive posts out immediately, only proof-reading for typos & grammatical errors afterwards & only then, when time permits.

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  2. morrienelson November 11, 2016 2:57 pm at 2:57 pm

    Randy – What short term targets are you looking at for the pullback?

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    • rsotc November 11, 2016 4:16 pm at 4:16 pm

      @morrienelson – Short-term pullback targets for IWM are 125.42 & 122.90. From where prices are in relation to the apex of this very steep bearish rising wedge (15-minute chart), I strongly suspect that first target will be hit on a gap down at the open on Monday morning or at least at some point during Monday’s trading session. G-luck!

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  3. irawood November 11, 2016 3:38 pm at 3:38 pm

    IWM up over 10% this week alone, you would expect some type of pullback

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