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Two Paths for Small Cap Stocks

The small cap stocks as tracked by the Russell 2000 Index traded firmly into the buy zone over the past few weeks.

However, it is now at risk of falling back into the sell zone…

This sets up a decision whether to trade into a long position or look for selling ideas at the right levels utilizing one-hour charts.

But be careful, as there are risks to selling the market right now…

Buy RTY Now… or Wait?

Here’s how we see the small cap stocks that are embodied in the Russell 2000 Index and its futures contract (RTY) trading this week…

Russell 2000 Index Futures Contract (RTY) Price and Technical Analysis – Source: TradingView

The RTY one hour time frame is in a downtrend. The market is making lower lows and lower highs. 

The market has a down Fibonacci with an extension price point 1,886.20, about -334 ticks below the market. 

The market is already at a low price. It will be a good idea to wait for the market to give a high price near the down trend line before looking for a selling idea. 

Entry: Counter trend line break bearish near the down trend line. 

Stop: In the buy zone above the entry 

Limit: 1886.20 

Once or if the market gives the entry, and as long as the market stays in the sell zone, it will be a good idea to turn to the five minute time frame and to look for Tunnel Trader short / Destination Trader short / Chandelier Trader short ideas towards the one hour limit.

The Bottom Line

There are multiple ways to trade the futures, stock and other markets. We can trade the indexes, both up and down, as well as individual stocks… 

But I have been working on a special strategy for identifying great stocks that you might want to learn more about. 

If you’re interested, check out the important P.S. below…

For more on the markets as well as trading education and trading ideas like this one, look for the next edition of Josh’s Daily Direction in your email inbox each and every trading day.

I’ll be bringing you more of my stock and futures contract trading tutorials as well as some additional trading ideas.

And before you go, head on over to the Traders Agency YouTube channel for breaking market news, live trading sessions, educational videos and much, much more! Click here now to subscribe!

Keep on trading,

P.S. I have been working with my team to find what I call “marked stocks.”

These are stocks that are potentially setting up to generate big gains… And you need to get in on them with me.

To learn more, click here!

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