On the daily chart below, we can
see that after bouncing from the 1723 support, the Russell 2000 rallied all
the way up to the 50% Fibonacci
retracement level and got rejected once again. We’ve been
stuck in this range for 3 months and as of now it doesn’t look like we’ll get
out of it soon.
The fundamentals are mixed as we
have the debt ceiling drama and the chance of more hikes from the Fed on one
side, and good economic data, strong labour market and no more banking fears on
the other side. Looks like something big needs to happen for the Russell 2000
to break free.
RUSSELL 2000 TECHNICAL ANALYSIS
On the 4
hour chart below, we can see that the tap into the 50% Fibonacci resistance was
almost perfect and the Russell 2000 started to reverse soon after as strong US
Services PMI might have caused some fears of stickier core
inflation and thus a chance of a more hawkish Fed going forward. The target now
should be a return to the bottom of the range at the 1723 level, but the
sellers will need to clear the 1740 swing low support first.
Generally,
it’s better to sit out a rangebound market and wait for a clear break to ride
the following wave. Nonetheless, traders can also “play the range” by buying at
support and selling at resistance, which is a strategy that has worked pretty
well with the Russell 2000.
On the 1 hour chart, we can see
that we have this short-term downtrend within the range with a possible target
at the 1723 support. We have the trendline that may act as resistance for
the buyers and offer the sellers a good entry point with limited risk just
above it. The resistance area at 1761 will be the one to watch.
Stay below it, and the sellers
will push the price into the 1740 swing low level and aim for a break lower to
the 1723 support. Get above it, and the buyers will look at the 1780 swing high
first and the 1820 resistance later.
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