• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Stock How to Trade Erratic Uptrends – An Example and Setup using IWM
Stock

How to Trade Erratic Uptrends – An Example and Setup using IWM

by January 4, 2025
by January 4, 2025 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

The Russell 2000 ETF managed a double-digit gain in 2024, but did it the hard way with several deep pullbacks. Pullbacks within uptrends are opportunities and we can find such opportunities using %B.

The chart below shows the Russell 2000 ETF (IWM) with the Zigzag(8) indicator. This indicator changes direction when there is a move greater than 8%, which means it ignores price moves that are less than 8%. I am showing this indicator to highlight five pullbacks of 8% or more in 2024. That’s a lot. In contrast, the S&P 500 SPDR (SPY) only experienced one 8+ percent pullback in early August.

Overall, IWM advanced 10% in 2024. That seems like a good year, but it was a “hard” 10% when we include the five 8+ percent pullbacks. This is simply the nature of small-cap stocks. They are less “trendy” than large-caps and have higher betas, making them more susceptible to wider fluctuations. Traders need to consider this when trading small-caps. As noted in Chart Trader this week, we see similar price action in the S&P 500 EW ETF (RSP) and S&P MidCap 400 SPDR (MDY).

Click here to take Chart Trader trial and get immediate access.

Buying upside breakouts is probably not the best strategy for trading IWM. Instead, traders should consider pullbacks and mean-reversion opportunities. We can identify such opportunities using Bollinger Bands (20,2) and %B (20,2). The middle line on the Bollinger Bands is the 20-day SMA and the bands are two standard deviations above and below. A close below the lower band means price fell two standard deviations and this creates an oversold condition.

Chartists can quantify oversold conditions using %B, which falls below 0 when the close is below the lower Bollinger Band. The blue lines on the chart above show %B dipping below 0 four times in 2024. Note that I would also only look for oversold conditions when price is above the 200-day SMA (long-term uptrend). When the bigger trend is up, a close below the lower Bollinger Band signals an oversold condition that can lead to a bounce.

December was a rough month for many stocks and ETFs. Even so, the weight of the evidence remains bullish for stocks and these pullbacks look like corrections within bigger uptrends. This week’s reports and videos focused on long-term breadth indicators, short-term oversold breadth, leading ETFs and a dozen ETFs with tradable pullbacks.

Click here to take a Chart Trader trial and get immediate access.

///////////////////////////////////////////////

You Might Also Like
  • The Ord Oracle August 29, 2023
  • Is the Trump Rally Like the Reagan Rally?
  • 5 Stocks To Save The Planet
  • Sector Spotlight: Sector Rotation and Macro Insights for the Economic Cycle!
Share
0
FacebookTwitterPinterestWhatsapp

previous post
Stock Market Ends the Week Strong: Could It Spark a Bullish January?
next post
SteadyOptions 2024 – Year in Review

You may also like

The Top Three Indicators Pressuring Earnings Right Now

October 5, 2023

What Does Equal-Weight S&P 500 Tell Us About Market Strength?

August 16, 2023

The Largest IPO In 2 Years Launched Last Week –...

September 16, 2023

Watch for Higher Lows in These Three Tech Stocks

May 13, 2024

StyleButtons: The Key to an Optimized Charting Process! Here’s How...

September 9, 2023

Farewell to the Eurodollar

June 30, 2023

Technology Sector Participation Is Fading

June 6, 2024

Follow the Smart Money; Technology and Homebuilder Stocks Loved Last...

October 8, 2023

The Best Technical Indicator for Long-Term Investors

February 23, 2024

Silver Cross BUY Signals on the Dow (DIA) and Russell...

May 8, 2024

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right Now

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025
    • U.S. foreign tax bill sends jitters across Wall Street

      May 30, 2025
    • Amazon taps Xbox co-founder to lead new team developing ‘breakthrough’ consumer products

      May 30, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,765 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,472 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,451 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,432 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,308 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Breakouts, Momentum & Moving Averages: 10 Must-See Stock Charts Right...

      May 31, 2025
    • Leadership Rotation Could Confirm Corrective Phase

      May 30, 2025
    • Run Your Stock Portfolio Like a Pro Sports Team

      May 30, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,106)
    • Investing (538)
    • Stock (2,581)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Week Ahead: Markets’ Reaction to Exit...

    June 3, 2024

    Your Money And You: This Investment...

    January 21, 2024

    Oil & Gas Equipment & Services...

    March 15, 2024
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here