Bullish? Lately, IWM has been somewhat following the broader market, like SPY, DIA and QQQ.
In fact, IWM took a harder hit than SPY in the sell off we saw. It sold off below 20% vs SPY that only sold off roughly 13%. SPY is definitely more averse to such dramatic sell-offs.
And while SPY flounders with extreme ups and downs in its price action, IWM has remained quite consistent and has been an attractive option for those escaping the huge volatility of SPY.
In fact, its created these very consistent channels where you can essentially go long or short and be sure to hit that price target within a week, regardless of the greater circumstances. Ideal for those applying martingale type strategies and those relying on the cyclic nature of the market (see the channels below):
In fact, because of this consistency, IWM responds very well to statistical predictions (my personal strategy) and, I admit, I have neglected this stock in favour of DIA. But I find DIA also is becoming slightly less predictable just like SPY, as SPY has started to flail its arms around and desperately clasp to the walls to keep itself afloat. As SPY continues to show dramatic swings in both directions, IWM has remained fairly predictable and stable and it actually looks somewhat bullish.
We see a cup and handle pattern forming on the 1 hour chart (see below):
Not only that, but we actually have a well defined bull flag that broke out and has maintained its breakout level (see below):
This definitely looks bullish on the 1 hour. I admit, its really hard to be bullish in this current market and especially given the current economic and political circumstances of the world. Its also hard to expect IWM to be bullish and SPY not to be.
But I don't necessarily think that this bullishness will neither be long term nor sustained. I just think that, in the short term, we could see some bullishness.
IWM has fallen dramatically. It is trading in its predicted normal range right now from a mathematical perspective. In any other given circumstance, this would be an ideal opportunity to go long. However, I think that we will see, eventually, this market is going to tank things down into the negative growth. SPY has not even been able to recover to its normal range yet. Its still operating at its inflated range. And until it finally gets the reality check it needs, we can bet that that beast is going to drag everything down eventually. I think its completely unfair that stocks like IWM, QQQ and DIA, which have normalized already, will pay the price for SPY's "pig whale"ness, but yeah, c'est le marché boursier.
I should add, that its very clear in the first chart that the lower channel is a pseudo-wedge type bearish flag. Its definitely a bearish sign, but we still have not had a breakout of this channel, YET.
Tomorrow, what I have calculated for IWM is the following:
High: 203.97, If we do get that bullish conviciton, we could see a breakout to the high 204 range. Anything higher than 204 would be serious bullish conviction.
Low: 201 range. If it maintains bullishness, we may only see high 202s.
My plan for IWM?
- Looking for some short term bullishness. Ideal situation is if this drops down near open to 202 / 201 range for a long entry.
- If this hits the ground running, I will likely be looking for rejection of the higher 203 range. Stop out would be above 204 range for a short entry (But this is contingent on what the model predicts based on AM data).
Based on technical analysis of these channels as well as probability calculations, ideal entries for a swing short position are over 207/208 price.
Ideal entries for a swing long position is 197 or below.
Not financial advice, just haven't done a true technical/math based analysis in a while and wanted to share what I was seeing on IWM.
Feel free to leave your thoughts and questions below.
Thanks for reading!
