RUT Hourly: Head and Shoulders Pattern Forming

The RUT is now working on building it's 9th leg of this rally and reached a resistance level today equal to the 470 area where a left shoulder was formed on the hourly charts.

The Daily Chart still looks VERY bullish as it bounced nicely off the uptrending 20MA and closed above the 50% level of yesterday's red daily bar.

The question now will be whether or not it has the strength to create yet another high to complete the 9th leg of this rally. One thing to keep in mind is that with this past years volatility, the market has been "over doing it" in each direction. Just when you think it can't go any further in one direction... it keeps on going. We saw this on the way down when it continued to ignore support levels over and over again.

Now that the market is retracing back up we're seeing some similar behavior. Therefore it's probably in your best interest to keep your positions sizes small and your time frame long enough to be right.

There is a high probability that we get a pull back on the RUT, but after today's price action there is no evidence yet on the daily chart to suggest that. It did briefly crack below the upward trendline yesterday, but marched back above it today and managed to get itself above the 8MA on the daily chart as well. Still bullish.

Just wanted to point out a possible head and shoulders pattern developing on the hour chart. It will need to close below 450 to break the neckline, and if the pattern completes the target would be 420. As you can see from the chart, the last pattern that confirmed was just the start of a larger move down.

RUT Hourly Chart:



RUT Daily Chart: