Summer stalking on the Russel Index

The first person who introduced the concept of “stalking” in investing was Van Tharp when he described his Ten Tasks of Trading. One of these tasks was: “stalking your trade”. Just like a cat stalks its prey looking for the best possible moment to pounce, so a trader can stalk an entry to get the best price for entry.

I think it would be better this summer to start to stalk the small cap stocks Russel 2000 Index. I wrote an article on March 20th about the presence on this Index of a not so common pattern: the “orthodox broadening formation” (1). This kind of pattern was present also on the Dow Jones Industrial Index, but it was luckily negated (2).

Since that article, the Index is continuing to proceed under the resistance formed by the uptrend line of the broadening formation with an incredible resilience, negating for the moment the fifth turning point (5?).

After the break of the relative strength ratio downtrend line vs. the S&P500 on November 2016 (a), this indicator has been always on flattening mode, but in these last weeks the MACD oscillator is regaining some strength (b).

Looking to a shorter term chart, we could note that since November 2016 the Index is in a channel with a slightly positive inclination, the relative strength ratio has formed two higher lows but is still flattening (a), and we have a weak MACD bullish crossover (b).

(1) https://www.marketplus.ch/news/why-should-you-look-at-russell-2000-index.html

(2) http://www.marketplus.ch/news/when-will-the-dow-jones-crash.html

Mario Valentino GUFFANTI CFTe – SAMT Vice President – Swiss Italian Chapter – mario.guffanti@samt-org.ch

Disclaimer: the above article is for general information and educational purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.