Russell 2000 (RTY, M2K) Low-Timeframe Short

Quick idea here as we look to get back in a groove with analysis/posts after a very light October. Not going to include a lot of elaboration, but we're looking to take advantage of a swing short (price depending) via a low timeframe (5-minute) RTY supply zone (defining candles not pictured here since sub-15-minute charts cannot be posted). If price approaches the zone hot (expanded range candle vs. grinding action), look to take the trade outright upon penetration of the lower bound (1795.4). If RTY stair-steps higher, forming new pockets of demand between current price and supply, consider taking a confirmation entry (price exit from zone). Stop should be placed a bit above the zone's upper bound. Keep in mind round # psych @ 1800. Targets are 2:1 and 5:1 (look for a fall back to origin of CPI breakout). Finally, US stocks have been very bullish as of late, so shorts fly in the face of current momentum. That said, RTY has consistently been the weakest of the 4 US equity indexes, so if you're going to short one, it's probably your best bet. Have to run, but good luck!

Stay tuned b/c a LOT more ideas are coming soon!

Jon @ LionHart Trading

Comment:

As we eluded to last night, the sensibility of this setup depended upon how price approached the sell zone. Given the formation of 15-min demand early-ish during the London trading session, a confirmation entry should have been used for any shorts. Furthermore, we're now seeing price turn a bit above the drop-base-drop 5-min continuation pattern. The 60-minute chart captured the broader zone where some sellers reside, so it would've been best to look for micro-timeframe reversals before establishing a position. Given seasonality, the fact that it's a Friday, and broader index strength, shorts are lower odds. Of course, they can still work, but discretion and a willingness to part with pre-formed ideas fluidly should remain central to one's approach. Can also check the respective volatility indexes (VIX, VXN, RVX) when considering shorts (ideally, vol should be into "demand" (a buy zone)).