RUT Weekly

The RUT has now spent 4 weeks consolidating in a range between 470 and 440 as you can see on the weekly chart.

On the daily chart, the wedge has been broken to the downside hinting of some more possible downward movement soon.

Notice the distinct downward angle of the weekly 20MA. For weeks the price has been overextended and has been making it's way back to retest the 20MA.

With the blue 8MA you can see how it trended down and has been consolidating sideways.

Three things can happen from here, each with a 33% chance of happening, more consolidation, a reversal to the upside or a continuation of the trend to the downside.

The break of the daily wedge to the downside gives a slight bias to a continuation of the trend downward, the trend of the 20MA and 50MA supports continued downward motion.

I personally like to trade with the prevailing trend, so I will wait to see which direction confirms out of this consolidation.

RUT Weekly Chart:

My Intraday Trading System and Rules

Disclaimer: The information below is for educational purposes only. The information is intended to show an example of how one can approach intraday trading but is not a recommendation nor suggestion of how to trade.

My intraday System is based on following the trend of the 5m 20MA.

The goal is to enter as soon as the direction is confirmed and to follow it as long as the trend remains intact.

Some rules and guidelines.

- Only trade in the direction of the 5m 20MA (no counter trend trades)
- Never trade a sideways 5m 20MA, be patient and let the market show it's hand first
- Once price has cleared consolidation, enter on first pull back
- Always wait for confirmation, do not anticipate
- Trade the 5m chart, but it's okay to based entries and exits on the 2m chart
- Believe that the 20MA will hold a pullback
- Believe that any large move will have a pull back and then move that same amount or more for it's second leg.
- If I get stopped out of a valid entry, immediately start looking for the second entry.

Since markets trend consolidate and then trend again, my objective is to enter at the beginning of the trend and milk the trend for as much profit as possible.

This works best in on a trending day, but below is a document of market direction for the last 2 days as measured by the direction of the 5m 20MA.

Wednesday:

6:30 Sideways
7:00 Up
7:30 Up
8:00 Up
8:30 Up
9:00 Sideways
9:30 Down
10:00 Down
10:30 Down
11:00 Down
11:30 Down
12:00 Down
12:30 Sideways
1:00 Sideways

Thursday:

6:30 Down
7:00 Down
7:30 Up
8:00 Up
8:30 Up
9:00 Up
9:30 Up
10:00 Up
10:30 Sideways
11:00 Sideways
11:30 Up
12:00 Sideways
12:30 Down
1:00 Down

From the two days above and by looking at their charts, you can see that both days have good opportunities for catching some extended moves. The Key is to first understand the direction of the 5m 20MA and second to watch how the price is acting next to it.

Notice on today's chart (Thursday) how at 7:30 the price was now above the 20MA and that it remained above the UPTRENDING 20MA 10:15, over 2 hours heading up.

My goal is to continue getting better at trading my 20MA trend rather then trading the candle movement within the trend. Watching the movement within the trend is more noise than creditable, actionable information.

I'm not advocating entering or exiting on each direction change of the 20MA, but my profits will be greater the more I can trust the 2OMA especially on large trending days in one direction.

TF Thursday: 5 Minute Chart



TF Wednesday: 5 Minute Chart

RUT: Looking at Some Trendlines

The RUT held it's own today and after gapping down rallied to close up 6.6 points at 455.

Pulling out to the Daily Chart there are several things that stand out to me. I'm going to list my observations below.

- The 200MA is pointing down, confirming an intermediate downtrend
- The 50MA is sideways, indicating consolidation
- With the consolidation the next move will either be continuation or reversal
- Markets generally resume in the direction of the intermediate trend (RUT did it for 5 years going up, now time for the bears?)
- Price is in the bottom 25% of the overall move down
- Price resisted when it hit the 38.2% retracement area
- Just confirmed lower low and lower high, confirming current short term bearish bias
- 20MA pointing down
- Wedge type formation forming on daily chart, wedges are typically a continuation pattern

Those are some observations of the chart taken at face value, since the trend is down, we have a lower high and lower low and a continuation pattern is forming I'd have to say the charts are looking a bit bearish. Having traded a lot of wedge patterns, the can be tricky and looking at this one there seems to be room for another move up to retest that upper trendline before it decides to fall. I am by no means saying that's what it's going to do, but now that I have my lines on here I start looking for the potential possibilities so I am better prepared with where resistance and support areas are likely. Just be aware that if it does get a bounce here there is some overhead resistance at that trendline.

RUT Daily Chart:

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RUT: Say Hello to the Downtrending 20MA

The RUT followed the morning session bullishness to hit our 2nd upside target of 460, but was quickly reminded that the area had double whammy resistance with a the 61.8% fib level AND the downtrending 20MA on the daily chart.

It closed lower to form a topping tail candle on the daily, pretty bearish but since the RUT is now in chop mode anything could happen here. I continue to watch the hourly charts as those give a little better clarity in this volatility. The RUT 200MA on the hourly is dead sideways and it broke the hourly uptrend so tomorrow I'll have my bear cap on for starters.

RUT Daily Chart:

RUT: Small Body Bar on Daily

The RUT closed higher today after reaching and testing the 455 (50% fib) area that was my closest upside target yesterday.

Two days up in a row in this market is an accomplishment, we'll have to see how it goes tomorrow. The same downside targets hold true that I posted yesterday and the same upside as well.

RUT Daily Chart:

RUT: Taking a Look at the Hourly

The general bias is down on the RUT (lower high, lower low), but it did hold the important 440 level we talked about last week.

Tomorrow will be important to see if it can follow through or if it's ready to fall apart some more.

I posted a 60m chart of the RUT because it gives a bit of a different picture then looking just at the dailies. First thing to note is the direction of the 20MA which is down, also notice the fibs I put on and where it resisted today...a 38.2 retracement.

While today closed positive I want to keep in mind that it just had a strong 2 day drop and a relief bounce was probable and some point and would likely retrace to 38.2% or 50%. We got the 38.2% and now I need to watch the price action tomorrow it see if the move continues to retrace up to 50% or 61.8% levels or if it's just going to roll over.

I have no bias what it will do tomorrow, but know the levels it is likely to target. The 440 area will be key again to hold for the bulls to have a chance to push it back up again.

On the upside I have the following targets / resistance:

- 455.78: 50% fib
- 460.18: 61.8% fib
- 474.42: 100% fib retrace

On the downside I have the following targets / support:

- 431.51: 100% retrace of last mini-rally
- 405.05: 161% retrace of last mini-rally
- 362.22: 261.8% retrace of last mini-rally

That covers a range of almost 100 points so we should be able to stay in that range on Tuesday.

RUT Hourly Chart (Bull upside fibs)



RUT Hourly Chart (Bear downside fibs)