Potential 'Bull Trap' in Russell 2000

Markets experienced another round of profit taking but there was only one market showing a potential top. Yesterday, the Russell 2000 edged a breakout but today sellers put this in jeopardy with a potential 'bull trap'.

The 'bull trap' in the Russell 2000 will be negated on a move above 1,433. Further losses will drop the index back inside the prior consolidation, but 'bull traps' often lead to moves to the other side of the consolidation - in this case, a break below 1,340.

The Nasdaq offers a shorting opportunity as the index struggles to make back last Friday's loss. The 20-day MA is playing as resistance; place stops a few percentage points above the MA.

The S&P is more likely to shape a consolidation as other indices distract attention. Selling volume was light, but there was a 'sell' trigger in On-Balance-Volume. There is no clear topping behaviour for this index, so it's a wait-and-see for now.

In contrast, the Dow Jones Industrial average added to prior gains. Momentum buyers will be pleased with its behavior.

For tomorrow, track action in the Russell 2000 and Nasdaq. If sellers add to today's action then this could start a wave of profit taking and new shorting opportunities.

You've now read my opinion, next read Douglas' blog.

I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for "fallond".

If you are new to spread betting, here is a guide on position size based on eToro's system.

Share on StockTwits

Accepting KIVA gift certificates to help support the work on this blog. All certificates gifted are converted into loans for those who need the help more.

Follow Me on Twitter

Dr. Declan Fallon is a blogger who trades for fun on eToro and can be copied for free.
. I invest in my pension fund as a buy-and-hold.

Popular posts from this blog

Round 2 for the bearish "black" candlestick in S&P and Nasdaq

Big bearish engulfing patterns as positive start negated

Being "Right" but still losing...


Show more