IWM Russell 2000 Small Cap Index ETF – Very Bullish Moving Average Expansion

by Olivier on April 16, 2015

The Russell 2000 Small Cap Index ETF IWM is about to run higher. As usual my opinions are not important. I trade the charts. And the chart of IWM – Russell 2000 ETF is extremely bullish right now. Here is why:

  • IWM closed at a new all time high
  • We have an ABC pattern playing out. Thrusting move, consolidation pattern,
    resumption of the trend leading into the consolidation pattern.
  • Bear trap that adds fuel to the fire.
  • Small cap stocks have the least exposure to a strong dollar.
    They often have no earnings and are mostly doing business domestically.

As you know, I was and still am very bullish on the US Dollar. I outlined the bullish thesis very early on and explained exactly why the US Dollar would move higher. It was all in the charts. Those who got it wrong basically got caught by the ‘Dollar’s impending demise’ narrative. As a technical trader I do the exact opposite. I am flexible, open-minded and when the technical situation changes, I change my mind and align myself with the new trend.

Here is my original: Bullish US Dollar Outlook Analysis.

On to the IWM charts. The weekly chart is a beautiful example of a high odds set-up. There is huge pattern pressure and we are witnessing very bullish moving average expansion. This always happens at the beginning of a new bullish thrusting move.

Click on the IWM weekly chart to enlarge:

You can see the purely technical price target for IWM is 145. As I outlined in my chart annotations a much more aggressive way to trade this bullish set-up would be to buy triple leveraged ETFs like TNA or UWM. It goes without saying that leveraged ETFs are not the perfect buy and hold instrument. But during strong trending periods they can be a very effective way to get maximum exposure.

Click on the daily IWM chart to enlarge:

The daily chart is displaying the first sign volume is about to increase. Overall the technical picture looks very constructive.

Remember: Bullish price moves accompanied by increasing volume are great. But price can easily march higher on low volume. Ultimately price is all that matters.

I become a buyer as soon as a stock makes a new high on its movement after having had a normal reaction. – Jesse Livermore

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