Technical Analysis

Russell 2000 futures (RTY) overbought as euphoric bulls go all in

  • Russell is up 10% YTD, but bullish momentum may be coming to an end.
  • Bullish technical indicators point toward a potentially overbought market.
  • Converging pattern brings a bearish price target of $1917 into focus.

RTY stats

The Russell is up 10% YTD and up 21% since the recent low made in October of last year. For the daily chart, technicals overall are bullish and are calling for buys only.

The chart appears overbought, however, and the long trade might be a bit exhausted at this point, so let’s take a look at what we see and how we can position ourselves moving forward.

Technical analysis

Fibonacci: Measuring the local top to the local bottom on the daily chart with the Fibonacci retracement tool shows that price is very close to trading at the 50% level. A level that generally causes a pause in the market’s momentum. At this point, we should consider this a significant level for RTY, and a lot more buying pressure would need to enter the market to push it above this level in the coming days.

RSI: The relative strength index is approaching overbought, and since there is no significant trend for RTY at the moment, I see this as a bearish sign. The market is ranging if we zoom out, so any moves into overbought territory is a signal to exit positions or, at least, ignore long trades.

Converging pattern: There is a converging pattern on the daily chart, too that price has been stuck within. As the market tests the upper part of this pattern, we can expect some extra selling pressure.

RTY Daily chart showing fibonacci retracement, RSI and convergence pattern


The market overall is in an uptrend since the Dollar is falling. This, however, does not mean that the best trades are to go with the market. I see better risk-reward ratios and probabilities on the short side at the moment in the Russel. With that being said, we need to see price remain below $2011. A bullish close above that level would signal that the buying pressure is extremely strong and would likely stop out bear positions, adding more power to the long trade.

Bearish targets of $1917 seem doable in the near term. Whether price will continue to fall from there is something we will need to wait for.