led a rally in US futures ahead of Monday's Wall Street session as the holiday-shortened Thanksgiving week begins. If history is any guide, taking into account seasonality statistics, the broader US market will recover, as it has most often done during this period based on data since 1950.
Some market observers expect small caps to have the advantage. That's because of their lower valuations after being pressured by the pandemic, making them more attractive as the economic recovery gains momentum. Also, domestic small cap companies can respond better to rising costs than large cap companies. Technical signals agree.
RUT Weekly
While the small cap index has been falling for the past two weeks, the chart reveals that the sell-off could be nothing more than a return move. The benchmark's proximity to the top of an asymmetric or bullish triangle – both are bullish in an uptrend with an upward breakout – is the technical reason for the Russell to climb this week. Also note that the drop came after the price reached the top of the rising channel, which is supported by the 50 WMA.
The short moving average crossed the long moving average on the MACD (Moving Average Convergence Divergence), indicating better pricing and a buy signal. The Rate of Change (ROC) is increasing, showing that momentum is also supporting a rally. the top of the pattern and hit another high before considering putting money at risk.
Moderate traders would be satisfied with support evidenced by the pattern.
Aggressive traders can go long at will, provided they accept the higher risk relative to the higher reward of moving ahead of other traders. A coherent trading plan is necessary for success. Here's an example:
Trade sample
Input: 2.345
Stop Loss: 2.340
Risk: 5 points
Target: 2.445
Reward: 100 points
Risk: Reward Ratio: 1:20
Author's Note: This is just an example, not the only truth about how to approach this trade. You should develop your own trading plan that includes your timing, budget and temperament. Use our examples for learning purposes, but not for profit, until you learn how to do it. Otherwise you won't get either one. Guaranteed. And there is no refund.
