On the daily chart below, we can see that after bouncing from the 1723 support, the Russell 2000 rallied all the way up to the 50% Fibonacci retracement level and got rejected once again. We’ve been stuck in this range for 3 months and as of now it doesn’t look like we’ll get out of it soon.
The fundamentals are mixed as we have the debt ceiling drama and the chance of more hikes from the Fed on one side, and good economic data, strong labour market and no more banking fears on the other side. Looks like something big needs to happen for the Russell 2000 to break free.
Russell 2000 Technical Analysis
On the 4 hour chart below, we can see that the tap into the 50% Fibonacci resistance was almost perfect and the Russell 2000 started to reverse soon after as strong US Services PMI might have caused some fears of stickier core inflation and thus a chance of a more hawkish Fed going forward. The target now should be a return to the bottom of the range at the 1723 level, but the sellers will need to clear the 1740 swing low support first.
Generally, it’s better to sit out a rangebound market and wait for a clear break to ride the following wave. Nonetheless, traders can also “play the range” by buying at support and selling at resistance, which is a strategy that has worked pretty well with the Russell 2000.
On the 1 hour chart, we can see that we have this short-term downtrend within the range with a possible target at the 1723 support. We have the trendline that may act as resistance for the buyers and offer the sellers a good entry point with limited risk just above it. The resistance area at 1761 will be the one to watch.
Stay below it, and the sellers will push the price into the 1740 swing low level and aim for a break lower to the 1723 support. Get above it, and the buyers will look at the 1780 swing high first and the 1820 resistance later.