As the week begins, a key focus of mine at miAnalysis is an attractive long entry scenario in TWM (ProShares UltraShort Russell 2000). The price structure of the mini Russell 2000 futures contract since mid-July appears to represent a topping process.
Attempts to sustain higher prices have failed. I’ll now look for a breach of the 1035.8 floor – the low point of the recent congestion – as confirmation of a breakdown. At that point, anyone who had bought since mid-July would be losing money and under pressure to sell in order to contain the loss. Slowing momentum supports the case for a breakdown. The fast and slow RSI averages reached overbought conditions in July and have since steadily fallen.
A LACK OF TECHNICAL SUPPORT
Beneath 1035.8 is an air pocket absent any technical support until 988.5, which is a 23.6% retracement of the uptrend from November to August. That’s a natural percentage retracement to occur before the next change of direction, based on the tendency for uplegs and downlegs to be proportionally related in accordance with the Fibonacci sequence. A 38.2% retracement is 943.1.
STOP-LOSS
A stop loss could be placed somewhere above the 8/8 high of 1051.8, which compares favorably with reward potential is 988.5.
