Small-caps finally have found their stride. We kissed the first target yesterday, just below $188. While the iShares Russell 2000 ETF (IWM) didn't quite get there, it came within a few cents. When discussing charts and ranges, I generally push targets to round numbers, so to be fair, we didn't officially hit the mark, but anytime a stock or an ETF gets within 0.1% or less of a target, I'm going to start punching out of a portion of a position.
People love round numbers, so getting a $188 sale can be challenging if the $188 is the lower end of your expected range. Unfortunately, people line up there, so taking $187.75 or $187.80 works just as well. The same is true for the $190 upper end of the range. Consider punching out at $189.78 or $189.89, something close to your target but a little shy of the round number.
It's the same idea with breakouts. Many traders would love to buy the break over $190, which is why we often see that quick spike. Let it settle for a short time before making your entry. Of course, you'll sometimes pay more, but you'll be surprised how often you see a pullback or even a failure of the initial intraday pop.
With IWM right now, I'd continue to use the 5-day exponential moving average (EMA) or the prior day's low as a trailing stop. Enjoy the momentum while it lasts. There's some firepower behind this move right now.
Conversely, we saw another significant divergence between IWM and the Invesco QQQ Trust (QQQ) , which closed within a whisper of the low yesterday. More interesting, though, is yesterday's low was right at the 10-day exponential moving average (EMA). If bulls want to bounce tech, then today is their day. A failure of the 10-day EMA sets us on a crash course with the 21-day EMA.
I will be interested in a long play on the QQQ should we test and hold the 21-day EMA. Then I'll be able to use that 21-day EMA as a stop and either the 5-day or 10-day EMA as the first upside target.
With the current momentum of small-caps, we could see enough rotation from tech to get us to the 21-day EMA before the end of the week or at the beginning of next week. There's a chance this 10-day EMA holds, but seeing how this is the first test in a few weeks, I'll let others hit the buy button first. If you've been riding the momentum long, a failure to hold the 10-day EMA is probably your signal to take some or all of your position off the table.
