Introduction
As we approach the final quarter of 2024, the E-mini Russell 2000 Index Futures presents a short trade opportunity that has caught our attention. After a 23% rally for the past year and multiple tests of the resistance level shown on the chart below, it could be time for a pullback. Let’s see what the technical are telling us.
Technical Analysis
Looking at the volume profile, most of the volume since June has concentrated in the 2,150–2,275 range. Price retested this zone for a fourth time if we include the September attempt, it failed to generate enough upward momentum, further strengthening the bearish outlook. If the price drops below $2,200, then we could see prices fall more rapidly as there is less volume on the volume profile. Usually, prices move quickly in low-volume nodes/zones because there is less liquidity, and thus, prices move quicker to find a stable zone where there is a lot of liquidity for buys and sells.
Trade Setup:
- Short Entry: 2,233
- Stop Loss: 2,320.5 (above resistance)
- Target: 2,135 (the trend line that could be forming an ascending triangle)
This setup offers a risk/reward ratio of around 2:1.
Final Thought:
This short trade is based on a short term outlook as the overall trend is still bullish. The current price action in RTY could be forming an ascending triangle pattern which is something to look out for because if the short trade does work out then there could be possible long position as the target is hit.
Keep in mind that bears would want to see prices move rapidly after dropping below $2,200 because if price stalls around this level, it could mean the bulls are already stepping in to buy it back up in the hope of a medium – long-term bullish trade. Basically, this trade is banking on profit-taking from bulls and hoping to make a quick swing trade short before the overall market likely continues higher.
