Russell 2000 Technical Analysis

Last week,
the Russell 2000 got under pressure amid geopolitical fears and a general risk
off sentiment. The latest developments saw Israel retaliating against Iran but
the latter downplaying the airstrikes. This episode might be behind our backs,
although it’s worth to keep an eye on it if it were to become a concern again.
On the macro side, the Fedspeak turned more hawkish, especially in the latter
part of the week as the inflation progress looks to be stalled. Overall, the
last week had plenty of bearish catalysts weighing on the market, so we will
probably need some positive data on the inflation front this week to turn the
sentiment around.

Russell 2000 Technical
Analysis – Daily Timeframe

On the daily chart, we can see that the Russell
2000 broke through the key support zone
around the 2020 level extending the selloff into new lows with the price now
trading near the key 1920 support zone. The buyers will likely step in around
these levels with a defined risk below the support to position for a rally into
new highs. The sellers, on the other hand, will want to see the price breaking
lower to increase the bearish bets into the next support at 1820.

Russell 2000 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can see that from a risk
management perspective, the sellers will have a much better risk to reward
setup around the downward trendline where
they will also find the confluence of the
50% Fibonacci retracement level
and the red 21 moving average. The
buyers, on the other hand, will want to see the price breaking higher to
invalidate the bearish setup and increase the bullish bets into a new cycle
high.

Russell 2000 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can see that the
recent price action formed what looks like a descending wedge.
Moreover, the price is diverging with
the MACD which
is generally a sign of weakening momentum often followed by pullbacks or
reversals. This might be a good signal for a reversal into the trendline. If
the price were to break above the upper bound of the wedge, we can expect the
buyers to pile in and target a rally into new highs. The sellers, on the other
hand, will likely lean on the upper bound of the wedge to position for a drop
into the 1920 support zone.

Upcoming
Events

This week is a bit empty on the data front with just a
few notable releases. We begin tomorrow with the US PMIs. On Thursday, we get
the US Q1 GDP and the latest US Jobless Claims figures. On Friday, we conclude
the week with the US PCE report.

This article was written by FL Contributors at www.forexlive.com.


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