US small caps coiling again following bullish breakout

10月1日

Traders should be alert for a breakout in Russell 2000 futures which are coiling in yet another triangle pattern. Having entered from below and with three consecutive higher closes, it feels like if there’s going to be a breakout, it’s most likely going to be bullish. Momentum indicators are pushing higher, bolstering that view.

If we see triangle resistance give way, consider buying the break with a stop beneath the level for protection. The initial target would be 2305, the high struck on September 19.

Another option would be to wait for a potential retest of triangle support. If the price were to bounce from it again, you could buy with a tight stop below for protection. Targets include triangle resistance and 2305.

Prospects for both setups would likely improve if accompanied by signs of further modest easing US labour market conditions, allowing for the Fed to cut interest rates without sparking renewed fears about demand or the broader economy.

Therefore, the JOLTS survey and ISM manufacturing PMI out later Tuesday could be very influential on the performance of small caps during the session.

Good luck!
DS